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Regular version of the site

Article

Optimal hedging ratio modeling using interday and intraday risk estimation: Moving window regression vs. cointegration approach

Model Assisted Statistics and Applications. 2016. Vol. 11. No. 1. P. 1-12.
Penikas H. I., Sirotkin I.

We considered the problem of choosing optimal hedging ratio taking into account interday and intraday return decomposition. It was shown that the standard hedging approach which uses only close prices (i.e. daily returns) is inefficient in comparison with hedging strategy based on open and close prices, i.e. when differentiating hedging ratio for interday and intraday periods. Results are confirmed both by applying Moving Window Regression and Error Correction Model for major world indexes for 1992–2012.