Constant & time-varying hedge ratio for FBMKLCI stock index futures

Constant & time-varying hedge ratio for FBMKLCI stock index futures

This paper examines hedging strategy in stock index futures for Kuala Lumpur Composite Index futures of Malaysia. We employed two different econometric methods such as-vector error correction model (VECM) and bivariate generalized autoregressive conditional heteroskedasticity (BGARCH) models to est...

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Bibliographic Details
Main Author: Islam, Mohd Aminul
Format: Conference or Workshop Item
Language:English
English
English
Published: 2016
Subjects:
HG Finance
HG4501 Stocks, investment, speculation
Online Access:http://irep.iium.edu.my/54322/
http://irep.iium.edu.my/54322/1/QP_37_2016.pdf
http://irep.iium.edu.my/54322/2/QP37_2016_Certificate.pdf
http://irep.iium.edu.my/54322/3/QP_37_Programme%20%26%20Abstract%20Book.pdf
id iium-54322
recordtype eprints
spelling iium-543222017-01-05T11:02:56Z http://irep.iium.edu.my/54322/ Constant & time-varying hedge ratio for FBMKLCI stock index futures Islam, Mohd Aminul HG Finance HG4501 Stocks, investment, speculation This paper examines hedging strategy in stock index futures for Kuala Lumpur Composite Index futures of Malaysia. We employed two different econometric methods such as-vector error correction model (VECM) and bivariate generalized autoregressive conditional heteroskedasticity (BGARCH) models to estimate optimal hedge ratio by using daily data of KLCI index and KLCI futures for the period from January 2012 to June 2016 amounting to a total of 1107 observations. We found that VECM model provides better results with respect to estimating hedge ratio for spot month futures and one-month futures, while BGACH shows better for distance futures. While VECM estimates time invariant hedge ratio, the BGARCH shows that hedge ratio changes over time. As such, hedger should rebalance his/her position in futures contract time to time in order to reduce risk exposure. 2016-08-22 Conference or Workshop Item NonPeerReviewed application/pdf en http://irep.iium.edu.my/54322/1/QP_37_2016.pdf application/pdf en http://irep.iium.edu.my/54322/2/QP37_2016_Certificate.pdf application/pdf en http://irep.iium.edu.my/54322/3/QP_37_Programme%20%26%20Abstract%20Book.pdf Islam, Mohd Aminul (2016) Constant & time-varying hedge ratio for FBMKLCI stock index futures. In: 37th International Conference on Quantum Probability and Related Topics (QP37) 2016, 22-26 August 2016, Kuantan, Pahang, Malaysia. (Unpublished)
repository_type Digital Repository
institution_category Local University
institution International Islamic University Malaysia
building IIUM Repository
collection Online Access
language English
English
English
topic HG Finance
HG4501 Stocks, investment, speculation
spellingShingle HG Finance
HG4501 Stocks, investment, speculation
Islam, Mohd Aminul
Constant & time-varying hedge ratio for FBMKLCI stock index futures
description This paper examines hedging strategy in stock index futures for Kuala Lumpur Composite Index futures of Malaysia. We employed two different econometric methods such as-vector error correction model (VECM) and bivariate generalized autoregressive conditional heteroskedasticity (BGARCH) models to estimate optimal hedge ratio by using daily data of KLCI index and KLCI futures for the period from January 2012 to June 2016 amounting to a total of 1107 observations. We found that VECM model provides better results with respect to estimating hedge ratio for spot month futures and one-month futures, while BGACH shows better for distance futures. While VECM estimates time invariant hedge ratio, the BGARCH shows that hedge ratio changes over time. As such, hedger should rebalance his/her position in futures contract time to time in order to reduce risk exposure.
format Conference or Workshop Item
author Islam, Mohd Aminul
author_facet Islam, Mohd Aminul
author_sort Islam, Mohd Aminul
title Constant & time-varying hedge ratio for FBMKLCI stock index futures
title_short Constant & time-varying hedge ratio for FBMKLCI stock index futures
title_full Constant & time-varying hedge ratio for FBMKLCI stock index futures
title_fullStr Constant & time-varying hedge ratio for FBMKLCI stock index futures
title_full_unstemmed Constant & time-varying hedge ratio for FBMKLCI stock index futures
title_sort constant & time-varying hedge ratio for fbmklci stock index futures
publishDate 2016
url http://irep.iium.edu.my/54322/
http://irep.iium.edu.my/54322/1/QP_37_2016.pdf
http://irep.iium.edu.my/54322/2/QP37_2016_Certificate.pdf
http://irep.iium.edu.my/54322/3/QP_37_Programme%20%26%20Abstract%20Book.pdf
first_indexed 2023-09-18T21:16:53Z
last_indexed 2023-09-18T21:16:53Z
_version_ 1777411621778358272

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