J. Risk Financial Manag. 2008, 1(1), 41-76; doi:10.3390/jrfm1010041
Article

Effective Basemetal Hedging: The Optimal Hedge Ratio and Hedging Horizon

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Published: 31 December 2008
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Abstract: This study investigates optimal hedge ratios in all base metal markets. Using recent hedging computation techniques, we find that 1) the short-run optimal hedging ratio is increasing in hedging horizon, 2) that the long-term horizon limit to the optimal hedging ratio is not converging to one but is slightly higher for most of these markets, and 3) that hedging effectiveness is also increasing in hedging horizon. When hedging with futures in these markets, one should hedge long-term at about 6 to 8 weeks with a slightly greater than one hedge ratio. These results are of interest to many purchasing departments and other commodity hedgers.
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MDPI and ACS Style

Dewally, M.; Marriott, L. Effective Basemetal Hedging: The Optimal Hedge Ratio and Hedging Horizon. J. Risk Financial Manag. 2008, 1, 41-76.

AMA Style

Dewally M, Marriott L. Effective Basemetal Hedging: The Optimal Hedge Ratio and Hedging Horizon. Journal of Risk and Financial Management. 2008; 1(1):41-76.

Chicago/Turabian Style

Dewally, Michaël; Marriott, Luke. 2008. "Effective Basemetal Hedging: The Optimal Hedge Ratio and Hedging Horizon." J. Risk Financial Manag. 1, no. 1: 41-76.

J. Risk Financial Manag. EISSN 1911-8074 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert