Release Time:2019-03-11  Hits:

Indexed by: Conference Paper

Date of Publication: 2009-07-24

Included Journals: Scopus、CPCI-SSH、CPCI-S、EI

Page Number: 378-380

Key Words: futures hedging; hedge ratio; Value at Risk; risk tolerance

Abstract: In this paper, Value at Risk of hedging portfolio is adopted to measure the risk of futures hedging. The control constraint based on risk tolerance of hedgers is established. The futures optimal hedge ratio is presented by maximizing the return of hedging portfolio under the control constraint. The contributions of the model are as follows: Firstly that we use VaR to construct the control constraint which reflects risk tolerance of hedgers. This method effectively avoids the huge losses suffered by hedging. Secondly, we prove the minimum variance hedging ratio and VaR hedging ratio are special cases of this model.