Empirical Analysis on the Effectiveness of Complex hedging: The Case of Bituminous Coal Trading

Won Cheol Yun (Hanyang University)

Journal of Derivatives and Quantitative Studies: 선물연구

ISSN: 1229-988X

Article publication date: 31 May 2008

Abstract

This study suggests a complex hedge model for coal traders that simultaneously consider the risk factors of coal price. ocean freight rate and foreign exchange rate. In addition. it Quantitatively analyses the superiority of the complex hedge model compared to the conventional one in terms of return flow stabilization. According to the ex-post and the ex-ante empirical results, a separate hedge could stabilize the return flow‘ but this might not be the best solution. That is. a complex hedge would give a better result in terms of hedging effectiveness. Thus‘ one could improve hedging effects by fully considering the inherent variance-covariance relationship among multiple risk factors.

Keywords

Citation

Yun, W.C. (2008), "Empirical Analysis on the Effectiveness of Complex hedging: The Case of Bituminous Coal Trading", Journal of Derivatives and Quantitative Studies: 선물연구, Vol. 16 No. 1, pp. 49-67. https://doi.org/10.1108/JDQS-01-2008-B0003

Publisher

:

Emerald Publishing Limited

Copyright © 2008 Emerald Publishing Limited

License

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