Optimal cross-hedging under futures mispricing: A note

Liquidity and hedging effectiveness under futures mispricing: international evidence

We analyze the hedging effectiveness of positions that replicate stock indexes using corresponding futures contracts through the application of a dynamic, stochastic hedging strategy proposed by Lafuente and Novales (2003). Conclusive gains do not emerge in any of the markets analyzed over the period considered, relative to the use of a constant unit hedge ratio. These findings are consistent w...

Preference-free optimal hedging using futures

This paper provides an alternative formulation and proof of the conditions under which optimal hedge ratios are independent of risk preference and points out that the conditions are satisfied by a wide class of models of spot and futures returns.  2000 Elsevier Science S.A. All rights reserved.

Cross Hedging with Single Stock Futures

This study evaluates the efficiency of cross hedging with single stock futures (SSF) contracts. We propose a new technique for hedging exposure to an individual stock that does not have options or exchange-traded SSF contracts written on it. Our method selects as a hedging instrument a portfolio of SSF contracts which are selected based on how closely matched their underlying firm characteristi...

A Note on the Length Effect of Futures Hedging

Optimal Hedging and Equilibrium in a Dynamic Futures Market*

This paper solves the optimal futures hedging problem in several simple continuous-time settings, and examines the resultant equilibrium in one case. Spot and futures prices are described by vector diffusion processes. A hedge is a vector stochastic process specifying a futures position in each futures market. Hedging profits and losses are marked to market in an interest-bearing (or interest-p...