Monash University
Browse
monash_2372.pdf (480.02 kB)

Basis Convergence and Long Memory in Volatility when Dynamic Hedging With Spi Futures

Download (480.02 kB)
journal contribution
posted on 2017-06-07, 01:31 authored by Dark, Jonathan
This paper examines the importance of basis convergence and long memory in volatility when estimating minimum variance hedge ratios (MVHRs) using SPI futures. The paper employs a bivariate FIGARCH model with a maturity effect to model the joint dynamics of the Australian All Ordinaries Index and the basis. This new approach allows for long memory in volatility, time varying correlations and the convergence between the All Ordinaries Index and its SPI futures over the life of the futures contract. The results illustrate the importance of these effects when modelling the joint dynamics and when estimating dynamic MVHRs.

History

Year of first publication

2004

Series

Department of Econometrics and Business Statistics

Usage metrics

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC