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Intraday Hedge Ratios and Option Pricing

In: Modelling and Forecasting High Frequency Financial Data

Author

Listed:
  • Stavros Degiannakis
  • Christos Floros

Abstract

The purpose of the first part of the chapter is to present techniques for estimating intraday hedge ratios. We introduce some underlying theory and motivation for the estimation of optimal hedge ratios and present the different approaches taken in the literature. For empirical application to the hourly hedging of the DAX index, we estimate naive strategies as well as some minimum-variance hedge ratios: constant over-time (MV-OLS) and dynamic (BEKK, asymmetric BEKK, CCC, DCC). For this, ultra-short horizon dynamic strategies seem to provide slightly better results.

Suggested Citation

  • Stavros Degiannakis & Christos Floros, 2015. "Intraday Hedge Ratios and Option Pricing," Palgrave Macmillan Books, in: Modelling and Forecasting High Frequency Financial Data, chapter 7, pages 243-273, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-39649-5_7
    DOI: 10.1057/9781137396495_7
    as

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