The French Notional futures contract in risk/return management

Abstract

Recent studies have shown that results on the relationship between futures and cash markets in the United States are not directly transferable to futures and cash markets in foreign countries. Using methodologies similar to those applied in previous studies on the use of futures markets in risk management, the effectiveness of the French Notional futures contract in obtaining the minimum-risk hedge positions for long term French government bonds, the impact of the French Notional futures contract in optimal asset allocation programs with fixed French government bond positions, and the use of the French Notional futures contract in optimal asset allocation programs with variable French government bond positions are examined. Results show that as for U.S. Treasury bond futures, the French Notional futures contract is an effective risk management tool for its domestic long term government bond market.