scholarly journals Currency Hedging Strategies Using Dynamic Multivariate GARCH

2012 ◽  
Author(s):  
Chia-Lin Chang ◽  
Lydia González Serrano ◽  
Juan-Angel Jiménez-Martin
Keyword(s):  
Multivariate Garch ◽  
Currency Hedging ◽  
Hedging Strategies

CURRENCY HEDGING STRATEGIES USING MULTIVARIATE GARCH MODELS

2016 ◽  
Vol 78 (4-4) ◽  
Author(s):  
Muhammad Azri Mohd ◽  
Abdul Halim Mohd Nawawi ◽  
Siti Aida Sheikh Hussin ◽  
Siti Nurul Ain Ramdzan
Keyword(s):  
Exchange Rates ◽  
Multivariate Garch ◽  
Hedging Strategy ◽  
Currency Hedging ◽  
Forward Markets ◽  
Futures Contract ◽  
Hedging Strategies ◽  
Multivariate Garch Models ◽  
Japanese Yen ◽  
Optimal Hedge

Hedging on futures or forward markets is an important tool to reduce risk. Thus, in order to manage the currency risk, it is important to have a suitable hedging strategy. Hedging is a means to offset potential losses on investment by making the second investment, which is expected to move in the opposite way in the financial markets. Therefore, this study aims to identify the relationship between spot and futures contract exchange rates and spot and forwards contract exchange rates. Secondly, calculate the optimal hedge ratio in order for effective optimal portfolio design and hedging strategy using CCC, DCC and Diagonal-BEKK models. The data consist of daily closing prices of spot, futures and 3-month forwards contract for currencies within ASEAN and ASEAN+3 countries. The empirical results revealed that the best model for hedging effectiveness is found to be CCC and DCC. These two models are able to reduce the variance 59.64 percent for Japanese Yen, 97.42 percent for Malaysia Ringgit, 66.14 percent for Singapore Dollar and 93.42 for Philippine Peso. Hence, it can be suggested to investors to hedge Malaysia Ringgit since the currency has the highest reduction in risk.

scholarly journals Currency hedging strategies using dynamic multivariate GARCH

2013 ◽  
Vol 94 ◽  
pp. 164-182 ◽  
Author(s):  
Chia-Lin Chang ◽  
Lydia González-Serrano ◽  
Juan-Angel Jimenez-Martin
Keyword(s):  
Multivariate Garch ◽  
Currency Hedging ◽  
Hedging Strategies

scholarly journals Crude Oil Hedging Strategies Using Dynamic Multivariate GARCH

2010 ◽  
Author(s):  
Roengchai Tansuchat ◽  
Chia-Lin Chang ◽  
Michael McAleer
Keyword(s):  
Crude Oil ◽  
Multivariate Garch ◽  
Hedging Strategies

scholarly journals Currency Risk Hedging With Time-Varying Correlations

2011 ◽  
Vol 1 (4) ◽  
Author(s):  
Binbin Guo
Keyword(s):  
Foreign Currency ◽  
Dynamic Structure ◽  
Multivariate Garch ◽  
Time Varying ◽  
Currency Risk ◽  
Risk Hedging ◽  
Hedging Strategies ◽  
Multivariate Garch Model ◽  
The Us ◽  
Optimal Dynamic

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: Times New Roman; font-size: x-small;">This paper studies currency risk hedge when volatilities and correlations of forward currency contracts and underlying assets returns are all time-varying.<span style="mso-spacerun: yes;">&nbsp; </span>A multivariate GARCH model with time-varying correlations is adopted to fit the dynamic structure of the conditional volatilities and correlations. The conditional risk-minimizing hedge strategies are estimated for an international portfolio of the US, UK and Switzerland stocks, for the period of February of 1973 to March of 2002. The empirical results show that the optimal dynamic hedging strategies can capture partially the currency fluctuations, and greatly reduce the currency risk and enhance the risk-adjusted returns of the portfolio with significant foreign currency exposures. </span></p>

Volatility in frontier markets: a Multivariate GARCH analysis

2019 ◽  
Vol 16 (3) ◽  
pp. 294-312
Author(s):  
Neha Seth ◽  
Monica Singhania
Keyword(s):  
Financial Distress ◽  
Spillover Effect ◽  
Multivariate Garch ◽  
Volatility Spillover ◽  
Causality Test ◽  
Content Type ◽  
Hedging Strategies ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to analyze the existence of volatility spillover effect in frontier markets. This study also examines whether any linkages exist among these markets or not. Design/methodology/approach Monthly data of regional frontier markets, from 2009 to 2016, are analyzed using Multivariate GARCH (BEKK and Dynamic Conditional Correlation (DCC)) models. Findings The result of cointegration test shows that the sample frontier markets are not linked in long run, and Granger causality test reveals that the markets under consideration do not cause each other even in the short run. BEKK test says that the effect of the arrival of shock from the own market does not last for longer, whereas shock from other markets lasts with the stronger persistence, and according to DCC test, the volatility spillover exists for all the markets. Practical implications The results of present study suggest that the frontier markets are not cointegrated in the long run as well as in the short run, which opens the doors for long-term investments in these markets in future, which may lead to decent returns. Long-term investors may draw the benefits from including the financial assets in their portfolios from these non-integrated frontier markets; nevertheless, they have to consider and implement diversification and hedging strategies during the period of financial turmoil, so as to protect themselves against economic and financial distress. Originality/value Significant work has been done on developed, developing and emerging markets but frontier markets are not explored much so far. This paper is an attempt to see the status of frontier stock markets as potential financial markets for diversification benefits.

scholarly journals Effect of Foreign Exchange Risk Hedging Techniques on Financial Performance of Listed Firms in Kenya

2018 ◽  
Vol 8 (3) ◽  
pp. 156 ◽  
Author(s):  
Monica Wanjiru Muiru ◽  
Sifunjo E. Kisaka ◽  
Fredrick Kalui
Keyword(s):  
Financial Performance ◽  
Foreign Exchange ◽  
Cash Flows ◽  
Least Square ◽  
Currency Hedging ◽  
Foreign Exchange Risk ◽  
Listed Firms ◽  
Risk Hedging ◽  
Hedging Strategies ◽  
Exchange Risk

The adoption of floating foreign exchange rate regime in the 1990s and international trade have led to increased exposure of Kenyan firms to foreign exchange risk. Foreign exchange risk can affect a firm’s expected cash flows, and by extension, its financial performance. This paper examines the effects of foreign exchange risk hedging techniques on the financial performance of publicly listed firms in Kenya. The target population constituted all the 54 firms that were continuously listed on the Nairobi Securities Exchange during the study period, from 2011 to 2016. The study used panel data research design. Secondary data was obtained from financial statements of the listed firms. The data was coded and analysed using descriptive and inferential statistics—correlation and regression—with the aid of STATA software. The feasible generalised least square model was used to test the hypotheses. The results show currency hedging has a positive effect on financial performance. This implies that when hedging strategies and hedging tools are implemented appropriately, they help firms achieve their financial objectives, increasing financial performance, hence creating value for shareholders.

scholarly journals Crude oil hedging strategies using dynamic multivariate GARCH

2011 ◽  
Vol 33 (5) ◽  
pp. 912-923 ◽  
Author(s):  
Chia-Lin Chang ◽  
Michael McAleer ◽  
Roengchai Tansuchat
Keyword(s):  
Crude Oil ◽  
Multivariate Garch ◽  
Hedging Strategies
Sign in / Sign up

Export Citation Format

Share Document