Abstract
AbstractIn this paper, the traditional price change hedge ratio estimation method is extended by applying the theory of cointegration in case of hedging with European Currency Unit (ECU) futures contracts. Previous studies ignore the last period's equilibrium error and short‐run deviations. The findings of this study indicate that the hedge ratio estimated by the error correction method is superior to the one obtained from the traditional method, as evidenced by the likelihood ratio test and out‐of‐sample forecasts. Hedgers can control the risk of their portfolios more effectively at a lower cost.
Full Text 
Sign-in/Register to access full text options
Sign-in/Register to access full text options 
Paper version not known
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
