The Dynamic International Optimal Hedge Ratio

Liu, Xiaochun and Jacobsen, Brian (2011): The Dynamic International Optimal Hedge Ratio.

Abstract

Instead of modeling asset price and currency risks separately, this paper derives the international hedge portfolio, hedging asset price and currency risk simultaneously for estimating the dynamic international optimal hedge ratio. The model estimation is specified in a multivariate GARCH setting with vector error correction terms and estimated for the commodity and stock markets of the U.S., the U.K., and Japan.

• Item Type: MPRA Paper
• Language: English
• Keywords: Optimal Hedge Ratio, International Hedging, Multivariate GARCH, Currency
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions

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