Exchange Rate Optimal Hedge Ratio by Gold Futures in Iran
Subject Areas : Journal of Investment KnowledgeRasool Sajad 1 , Adena Torosian 2
1 - Assistant professor, University of Science & Culture
2 - master's-degree student of financial engineering, University of Science & Culture
Keywords: Minimum variance hedge ratio, Futures, Return, Multivariate GARCH model, Hedging effectiveness,
Abstract :
In this article, the exchange rate (USD/RLS) minimum variance optimal hedge ratio by gold futures have been estimated and compared by different econometric approaches. For estimating this rate three domains, daily, two days and weekly domain for spot and futures prices are used due to increase futures and spot correlation by increasing return domain. The static optimal hedge ratio estimated by OLS, corrected OLS and univariate GARCH models and dynamic one by CCC and DCC multivariate GARCH models. In term of in sample efficiency weekly return DCC and out of sample one, weekly return CCC, has the highest efficiency. In all models, the estimated rate of weekly returns is more efficient than the estimated rates of daily and two days return.