Carpantier, Jean-François
[UCL]
Samkharadze, Besik
[UCL]
Hedging strategies for commodity prices largely rely on dynamic models to compute optimal hedge ratios. This study illustrates the importance of considering the commodity inventory effect (effect by which the commodity price volatility increases more after a positive shock than after a negative shock of the same magnitude) in modeling the variance–covariance dynamics. We show by in-sample and out-of-sample forecasts that a commodity price index portfolio optimized by an asymmetric BEKK–GARCH model outperforms the symmetric BEKK, static (OLS), or naïve models. Robustness checks on a set of commodities and by an alternative mean-variance optimization framework confirm the relevance of taking into account the inventory effect in commodity hedging strategies.
- Baillie Richard T., Myers Robert J., Bivariate garch estimation of the optimal commodity futures Hedge, 10.1002/jae.3950060202
- Bauwens Luc, Laurent Sébastien, Rombouts Jeroen V. K., Multivariate GARCH models: a survey, 10.1002/jae.842
- Black , F. 1976 Studies of stock price volatility changes Proceedings of the 1976 meeting of business and economic statistics section by American Statistical Association 177 181
- Bollerslev Tim, Modelling the Coherence in Short-Run Nominal Exchange Rates: A Multivariate Generalized Arch Model, 10.2307/2109358
- Brooks Chris, Henry Olan T., Persand Gita, The Effect of Asymmetries on Optimal Hedge Ratios, 10.1086/338484
- Campbell, The econometrics of financial markets (1996)
- Carpantier , J.-F. 2010 Commodities inventory effect
- Chen Sheng-Syan, Lee Cheng-few, Shrestha Keshab, Futures hedge ratios: a review, 10.1016/s1062-9769(02)00191-6
- Chou Ray Yeutien, Volatility persistence and stock valuations: Some empirical evidence using garch, 10.1002/jae.3950030404
- Engle Robert, Dynamic Conditional Correlation : A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models, 10.1198/073500102288618487
- Engle Robert F., Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation, 10.2307/1912773
- Engle Robert F., Kroner Kenneth F., Multivariate Simultaneous Generalized ARCH, 10.1017/s0266466600009063
- Glosten, Journal of Finance, 48, 1779 (1993)
- Gorton , G. B. Hayashi , F. Rouwenhorst , K. G. 2007 The fundamentals of commodity futures returns NBER Working Papers 13249, National Bureau of Economic Research, Inc
- Kroner Kenneth F., Ng Victor K., Modeling Asymmetric Comovements of Asset Returns, 10.1093/rfs/11.4.817
- Kroner, Pacific-Basin Capital Markets Research, 2, 397 (1991)
- Kroner Kenneth F., Sultan Jahangir, Time-Varying Distributions and Dynamic Hedging with Foreign Currency Futures, 10.2307/2331164
- Lien Donald, Tse Y. K., Some Recent Developments in Futures Hedging, 10.1111/1467-6419.00172
- Lien Donald, Tse Y. K., Tsui Albert K. C., Evaluating the hedging performance of the constant-correlation GARCH model, 10.1080/09603100110046045
- Lien Donald, Yang Li, Spot-futures spread, time-varying correlation, and hedging with currency futures, 10.1002/fut.20225
- Lien Donald, Yang Li, Asymmetric effect of basis on dynamic futures hedging: Empirical evidence from commodity markets, 10.1016/j.jbankfin.2007.01.026
- Malkiel Burton G, The Efficient Market Hypothesis and Its Critics, 10.1257/089533003321164958
- Ng Victor K., Pirrong Stephen Craig, Fundamentals and Volatility: Storage, Spreads, and the Dynamics of Metals Prices, 10.1086/296630
| Bibliographic reference |
Carpantier, Jean-François ; Samkharadze, Besik. The asymmetric commodity inventory effect on the optimal hedge ratio. In: The Journal of Futures Markets, Vol. 33, no.9, p. 868-888 (2013) |
| Permanent URL |
http://hdl.handle.net/2078.1/135151 |
