Risk Management of the Won/Dollar Spot and Futures Exchange Rates

Title
Risk Management of the Won/Dollar Spot and Futures Exchange Rates
Author(s)
임병진오창혁김도형
Keywords
Cointegration; ECT-GARCH; nonstationary; normal error terms; OLS; optimal hedging ratio; spot and futures price; VECM; won/dollar exchange rate.
Issue Date
201402
Publisher
한국무역연구원
Citation
무역연구, v.10, no.1, pp.35 - 51
Abstract
This research has been conducted to determine the optimal hedging ratio of the spot and futures exchange rates in order to reduce exchange risks between the Korean won and the U.S. dollar. Using data of the won/dollar exchange rate spot and futures prices from the Korea Exchange, KRX, four methods were compared to obtain the hedging ratio: the naive method, the minimum variance hedging model, the vector error correction model, and GARCH with error correction model (ECT-GARCH). After comparing hedging performances of the models, the minimum variance hedging model outperformed others even though it does not take nonstationarity, cointegration relationship, and time variant property of the time series into account.
URI
http://hdl.handle.net/YU.REPOSITORY/33028
ISSN
1738-8112
Appears in Collections:
경영대학 > 경영학과 > Articles
이과대학 > 통계학과 > Articles
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