On the Measurement of Hedging Effectiveness for Long-Term Investment Guarantees

Although the finance literature has devoted a lot of research into development advanced models for improving pricing and hedging performance, there been much less emphasis on approaches to measure dynamic effectiveness. This article discusses statistical framework based regression analysis effectiveness hedges long-term investment guarantees. The importance taking model risk account is emphasized. difficulties in reducing an appropriately low level lead us propose new perspective hedging, recognize it as tool modify risk–reward relationship unhedged position.