Evaluation of realized multi-power variations in minimum variance hedging

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Title:	Evaluation of realized multi-power variations in minimum variance hedging
Authors:	Hung, Jui-Cheng
Contributors:	財金系
Keywords:	Realized multi-power variations Minimum variance strategy Realized DCC-GARCH model Transaction costs
Date:	2015-12
Issue Date:	2016-02-26 09:33:42 (UTC+8)
Abstract:	This study investigated the hedging performance of realized multi-power variations under minimum variance strategy. The minimum variance hedge ratios are estimated by the realized DCC-GARCH model, and the risk and utility metrics are used to evaluate the performances of long and short hedge. The empirical results derived from the S&P 500 index demonstrated that the realized DCC-GARCH model with realized tri-power variation outperforms others in reducing risks, and generates largest economic benefits. While considering transaction costs, the superiority of the realized DCC-GARCH model with realized multi-power variations persists and produced less rebalancing costs than the realized DCC-GARCH model with realized variance. (C) 2015 Elsevier B.V. All rights reserved.
Relation:	ECONOMIC MODELLING 卷: 51 頁碼: 672-679
Appears in Collections:	[Department of Banking & Finance ] periodical articles

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