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Short Term Hedging Using Futures Contracts

Author

Listed:
  • Maria CARACOTA DIMITRIU

    (The Bucharest University of Economic Studies, Romania)

  • Ioana – Diana PAUN

    (The Bucharest University of Economic Studies, Romania)

Abstract

The objective of this paper is to demonstrate the effectiveness of risk management portfolio using futures contracts to achieve hedging. The risk can be minimized once measured, and the traditional tool of market risk management is hedging. The objective is to identify the optimum position to minimize the variation in a contract concluded now. Clearly hedging portfolio will reduce not only risk but also profitability. In conclusion hedging aims risk management, no additional gain. Portfolio manager will have the opportunity to carefully consider the relationship between risk and return in order to act according to his profile and targeted results.

Suggested Citation

  • Maria CARACOTA DIMITRIU & Ioana – Diana PAUN, 2012. "Short Term Hedging Using Futures Contracts," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(2), pages 436-445, December.
    • Handle: RePEc:rom:econmn:v:15:y:2012:i:2:p:436-445
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    References listed on IDEAS

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    1. Darren Butterworth & Phil Holmes, 2000. "Mispricing in stock index futures contracts: evidence for the FTSE 100 and FTSE mid 250 contracts," Applied Economics Letters, Taylor & Francis Journals, vol. 7(12), pages 795-801.
    2. Anil K. Bera & Philip Garcia & Jae-Sun Roh, 1997. "Estimation of Time-Varying Hedge Ratios for Corn and Soybeans: BGARCH and Random Coefficient Approaches," Finance 9712007, University Library of Munich, Germany.
    3. Chang, Jack S. K. & Shanker, Latha, 1987. "A Risk-Return Measure of Hedging Effectiveness: A Comment," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(3), pages 373-376, September.
    4. Darren Butterworth & Phil Holmes, 2000. "Ex Ante Hedging Effectiveness of UK Stock Index Futures Contracts: Evidence for the FTSE 100 and FTSE Mid 250 Contracts," European Financial Management, European Financial Management Association, vol. 6(4), pages 441-457, December.
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    Cited by:

    1. Lerskullawat, Polwat, 2019. "Hedging Effectiveness on the Thailand Futures Exchange Market," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 26(2), December.
    2. Behrouz LariSemnani & Reihaneh Benesloo, 2015. "Ranking of Hedging Tools from the Perspective of Tehran Stock Exchange Investors," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 5(7), pages 926-940, July.

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    More about this item

    Keywords

    Futures contracts; derivatives; hedging; OLS.;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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