Risk hedging by use of Hybrid future contracts index (Case: Iran financial market)

Subject Areas : Financial engineering

Hamid Eskandari ¹ , Ali Asghar Anvary Rostamy ² , Ali Husseinzadeh Kashan ³

1 - کارشناس ارشد واحد تحقیق و توسعه شرکت بورس تهران،
2 - استاد تمام، عضو هیئت‌علمی دانشگاه تربیت مدرس،
3 - استادیار، عضو هیئت‌علمی دانشگاه تربیت مدرس،

Received: 2016-03-07 Accepted : 2016-10-19 Published : 2016-09-22

Keywords: Risk hedging, Futures contract, min variance optimal hedge ratio, hedging efficiency, Econometric models,

Abstract :

Former local and foreign researches in risk hedging area have investigated optimum delivery month and optimum risk hedging ratio. In this research risk hedging by use of all delivery months by use of weekly data is discussed because of low number of transactions and contract's volumes in Iran Mercantile Exchange. Three scenarios are defined. For this purpose three scenarios is defined. In the first scenario the number of positions on each delivery month is equal with the number of trades on each delivery month in previous week. In the second scenario positions are taken based on number of trades in previous trading day and in the third scenario positions are taken base on average number of trades in the last week. However, optimum hedge ratio should be considered in each delivery month. Static hedging ratio by use of minimum variance method and different econometrics models for in the sample and out of sample tests is calculated. Results show that three scenario has the ability to reduce risk. In the sample tests indicate that the first scenario with use of VAR model has the best efficiency and in the out of sample tests second scenario with Tarch model has the best efficiency.