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Applied Economics Volume 39, 2007 - Issue 10
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Original Articles

A bivariate Markov regime switching GARCH approach to estimate time varying minimum variance hedge ratios

Hsiang-Tai Lee Department of Banking and Finance, National Chi Nan University, Taiwan
&
Jonathan K. Yoder School of Economic Sciences, Washington State University, USACorrespondence[email protected]
Pages 1253-1265 | Published online: 04 Apr 2011

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Paweł Polak & Urban Ulrych. (2024) Dynamic currency hedging with non-Gaussianity and ambiguity. Quantitative Finance 24:2, pages 305-327.
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Yang Qu & Pan Xiong. (2019) Empirical study on the efficiency of the stock index futures market from the information and functional perspectives – empirical evidence from China. Economic Research-Ekonomska Istraživanja 32:1, pages 3733-3753.
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Hernan A. Tejeda & Barry K. Goodwin. (2014) Dynamic multiproduct optimal hedging in the soybean complex – do time-varying correlations provide hedging improvements?. Applied Economics 46:27, pages 3312-3322.
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AkramShavkatovich Hasanov & AhmadZubaidi Baharumshah. (2014) Exchange-Rate Risk and Exports. Problems of Economic Transition 57:1, pages 80-101.
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Nikos Nomikos & Enrique Salvador. (2014) The role of volatility regimes on volatility transmission patterns. Quantitative Finance 14:1, pages 1-13.
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Hsiang-Tai Lee. (2011) Regime switching fractional cointegration and futures hedging. Applied Financial Economics 21:15, pages 1145-1157.
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Kuang-Liang Chang. (2011) The optimal value-at-risk hedging strategy under bivariate regime switching ARCH framework. Applied Economics 43:21, pages 2627-2640.
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Hsiang-Tai Lee. (2008) The effects of asymmetries and regime switching on optimal futures hedging. Applied Financial Economics Letters 4:2, pages 133-136.
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Articles from other publishers (61)

Hsiang‐Tai Lee. (2024) Riemannian‐geometric regime‐switching covariance hedging. Journal of Futures Markets.
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Taehyun Lee, Ioannis C. Moutzouris, Nikos C. Papapostolou & Mahmoud Fatouh. (2023) Foreign exchange hedging using regime‐switching models: The case of pound sterling . International Journal of Finance & Economics.
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Taehyung Lee, Ioannis Moutzouris, Nikos C. Papapostolou & Mahmoud Fatouh. (2023) Foreign exchange hedging using regime-switching models: the case of pound sterling. SSRN Electronic Journal.
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Pengfei Zhu, Tuantuan Lu & Shenglan Chen. (2022) How do crude oil futures hedge crude oil spot risk after the COVID-19 outbreak? A wavelet denoising-GARCHSK-SJC Copula hedge ratio estimation method. Physica A: Statistical Mechanics and its Applications 607, pages 128217.
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Hsiang‐Tai Lee. (2021) A Markov regime‐switching Cholesky GARCH model for directly estimating the dynamic of optimal hedge ratio. Journal of Futures Markets 42:3, pages 389-412.
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Maddalena Cavicchioli. (2021) Fourth Moment Structure of Markov Switching Multivariate GARCH Models. Journal of Financial Econometrics 19:4, pages 565-582.
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Ling Lin, Zhongbao Zhou, Yong Jiang & Yangchen Ou. (2021) Risk spillovers and hedge strategies between global crude oil markets and stock markets: Do regime switching processes combining long memory and asymmetry matter?. The North American Journal of Economics and Finance 57, pages 101398.
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Aikaterini (Katerina) Tsoukala & Georgios Tsiotas. (2021) Assessing green bond risk: an empirical investigation. Green Finance 3:2, pages 222-252.
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Jiayu Jin, Liyan Han, Lei Wu & Hongchao Zeng. (2020) The hedging effect of green bonds on carbon market risk. International Review of Financial Analysis 71, pages 101509.
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Jia Wang, MengChu Zhou, Xiu Jin, Xiwang Guo, Liang Qi & Xu Wang. (2020) Variance Minimization Hedging Analysis Based on a Time-Varying Markovian DCC-GARCH Model. IEEE Transactions on Automation Science and Engineering 17:2, pages 621-632.
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Maddalena Cavicchioli. (2020) Generalised cepstral models for the spectrum of vector time series. Electronic Journal of Statistics 14:1.
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Apostolos SerletisLibo Xu. (2019) Interfuel Substitution: Evidence from the Markov Switching Minflex Laurent Demand System with BEKK Errors. The Energy Journal 40:6, pages 111-128.
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Yudong Wang, Qianjie Geng & Fanyi Meng. (2019) Futures hedging in crude oil markets: A comparison between minimum-variance and minimum-risk frameworks. Energy 181, pages 815-826.
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Ling Lin, Zhongbao Zhou, Qing Liu & Yong Jiang. (2019) Risk transmission between natural gas market and stock markets: portfolio and hedging strategy analysis. Finance Research Letters 29, pages 245-254.
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Apostolos Serletis & Libo Xu. (2019) The demand for banking and shadow banking services. The North American Journal of Economics and Finance 47, pages 132-146.
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Donald Lien, Hsiang‐Tai Lee & Her‐Jiun Sheu. (2018) Hedging systematic risk in the commodity market with a regime‐switching multivariate rotated generalized autoregressive conditional heteroskedasticity model. Journal of Futures Markets 38:12, pages 1514-1532.
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Wen-Chung Hsu & Hsiang-Tai Lee. (2018) Cross Hedging Stock Sector Risk with Index Futures by Considering the Global Equity Systematic Risk. International Journal of Financial Studies 6:2, pages 44.
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Yan Zhipeng & Li Shenghong. (2018) Hedge ratio on Markov regime-switching diagonal Bekk–Garch model. Finance Research Letters 24, pages 49-55.
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Marta Giampietro, Massimo Guidolin & Manuela Pedio. (2018) Estimating stochastic discount factor models with hidden regimes: Applications to commodity pricing. European Journal of Operational Research 265:2, pages 685-702.
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Beatriz Martínez & Hipòlit Torró. (2018) Hedging spark spread risk with futures. Energy Policy 113, pages 731-746.
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Monica Billio, Roberto Casarin & Anthony Osuntuyi. (2018) Markov switching GARCH models for Bayesian hedging on energy futures markets. Energy Economics 70, pages 545-562.
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Gurmeet Singh. (2017) Estimating Optimal Hedge Ratio and Hedging Effectiveness in the NSE Index Futures. Jindal Journal of Business Research 6:2, pages 108-131.
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Yu‐Sheng Lai, Her‐Jiun Sheu & Hsiang‐Tai Lee. (2017) A Multivariate Markov Regime‐Switching High‐Frequency‐Based Volatility Model for Optimal Futures Hedging. Journal of Futures Markets 37:11, pages 1124-1140.
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EnDer Su. (2017) Stock index hedging using a trend and volatility regime-switching model involving hedging cost. International Review of Economics & Finance 47, pages 233-254.
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Dennis Philip & Yukun Shi. (2016) Optimal hedging in carbon emission markets using Markov regime switching models. Journal of International Financial Markets, Institutions and Money 43, pages 1-15.
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Seth J. Kopchak. (2015) The regime-switching risk premium in the gold futures market. Journal of Economics and Finance 40:3, pages 472-491.
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Kapil Gupta & Mandeep Kaur. (2015) Impact Of Financial Crisis On Hedging Effectiveness Of Futures Contracts: Evidence From The National Stock Exchange Of India. South East European Journal of Economics and Business 10:2, pages 69-88.
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Jonathan Dark. (2015) Futures hedging with Markov switching vector error correction FIEGARCH and FIAPARCH. Journal of Banking & Finance 61, pages S269-S285.
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Beatriz Martínez & Hipòlit Torró. (2015) European natural gas seasonal effects on futures hedging. Energy Economics 50, pages 154-168.
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Amir H. Alizadeh, Chih-Yueh Huang & Stefan van Dellen. (2015) A regime switching approach for hedging tanker shipping freight rates. Energy Economics 49, pages 44-59.
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Daniel King & Ferdi Botha. (2015) Modelling stock return volatility dynamics in selected African markets. Economic Modelling 45, pages 50-73.
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Stavros Degiannakis & Christos FlorosStavros Degiannakis & Christos Floros. 2015. Modelling and Forecasting High Frequency Financial Data. Modelling and Forecasting High Frequency Financial Data 243 273 .
Donald Lien, Geul Lee, Li Yang & Chunyang Zhou. 2015. Handbook of Financial Econometrics and Statistics. Handbook of Financial Econometrics and Statistics 1891 1908 .
Yu-Chia Hsu & An-Pin Chen. (2014) A clustering time series model for the optimal hedge ratio decision making. Neurocomputing 138, pages 358-370.
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Hernan Tejeda & Dillon Feuz. (2014) Determining the effectiveness of optimal time-varying hedge ratios for cattle feeders under multiproduct and single commodity settings. Agricultural Finance Review 74:2, pages 217-235.
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Enrique Salvador & Vicent Aragó. (2013) Measuring Hedging Effectiveness of Index Futures Contracts: Do Dynamic Models Outperform Static Models? A Regime‐Switching Approach. Journal of Futures Markets 34:4, pages 374-398.
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Hui-Ming Zhu, Rong Li & Sufang Li. (2014) Modelling dynamic dependence between crude oil prices and Asia-Pacific stock market returns. International Review of Economics & Finance 29, pages 208-223.
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Junhui Fu. (2014) Multi-objective hedging model with the third central moment and the capital budget. Economic Modelling 36, pages 213-219.
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Rania Jammazi. 2014. The Interrelationship Between Financial and Energy Markets. The Interrelationship Between Financial and Energy Markets 71 111 .
Carol Alexander, Marcel Prokopczuk & Anannit Sumawong. (2013) The (de)merits of minimum-variance hedging: Application to the crack spread. Energy Economics 36, pages 698-707.
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Yu-Chia Hsu & An-Pin Chen. (2012) Futures hedging using clusters with dynamic behavior of market fluctuation. Futures hedging using clusters with dynamic behavior of market fluctuation.
Donald Lien. (2011) A note on the performance of regime switching hedge strategy. Journal of Futures Markets 32:4, pages 389-396.
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Rania Jammazi. (2012) Oil shock transmission to stock market returns: Wavelet-multivariate Markov switching GARCH approach. Energy 37:1, pages 430-454.
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Jui-Cheng Hung, Yi-Hsien Wang, Matthew C. Chang, Kuang-Hsun Shih & Hsiu-Hsueh Kao. (2011) Minimum variance hedging with bivariate regime-switching model for WTI crude oil. Energy 36:5, pages 3050-3057.
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Chao-Chun Chen & Wen-Jen Tsay. (2011) A Markov regime-switching ARMA approach for hedging stock indices. Journal of Futures Markets 31:2, pages 165-191.
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Hsiang-Tai Lee. (2010) Regime switching correlation hedging. Journal of Banking & Finance 34:11, pages 2728-2741.
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Xin Zhan & Weizhong Chen. (2010) A Novel Approach for Estimating Position Ratio of International Portfolio Arbitrage. A Novel Approach for Estimating Position Ratio of International Portfolio Arbitrage.
Hsiang‐Tai Lee. (2009) A copula‐based regime‐switching GARCH model for optimal futures hedging. Journal of Futures Markets 29:10, pages 946-972.
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Ming-Yuan Leon Li. (2009) Could the jump diffusion technique enhance the effectiveness of futures hedging models?. Mathematics and Computers in Simulation 79:10, pages 3076-3088.
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Amir H. Alizadeh, Nikos K. Nomikos & Panos K. Pouliasis. (2008) A Markov regime switching approach for hedging energy commodities. Journal of Banking & Finance 32:9, pages 1970-1983.
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Pawel Polak & Urban Ulrych. (2021) Dynamic Currency Hedging with Ambiguity. SSRN Electronic Journal.
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Apostolos Serletis & Libo Xu. (2018) The Demand for Banking and Shadow Banking Services. SSRN Electronic Journal.
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Monica Billio, Massimiliano Caporin, Lorenzo Frattarolo & Loriana Pelizzon. (2016) Networks in Risk Spillovers: A Multivariate GARCH Perspective. SSRN Electronic Journal.
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Dennis Philip & Yukun Shi. (2014) Optimal Hedging in Carbon Emission Markets Using Markov Regime Switching Models. SSRN Electronic Journal.
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Waleem Alausa. (2014) Dynamic Futures Hedging with a Vector Error Correction Markov Switching Multifractal Model. SSRN Electronic Journal.
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Monica Billio, Roberto Casarin & Ayokunle Anthony Osuntuyi. (2014) Markov Switching GARCH Models for Bayesian Hedging on Energy Futures Markets. SSRN Electronic Journal.
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Ning Rong & Stefan Trück. (2012) Hedging Gold and Oil Portfolios in Different Regimes. SSRN Electronic Journal.
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Carol Alexander, Marcel Prokopczuk & Anannit Sumawong. (2012) The (De)Merits of Minimum-Variance Hedging: Application to the Crack Spread. SSRN Electronic Journal.
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Jonathan Dark. (2011) Modeling the Joint Dynamics of Spot and Futures Markets with a Regime Switching Long Memory Volatility Process. SSRN Electronic Journal.
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Banyu Vidiapratama & Zaafri A. Husodo. (2011) Optimal Commodity and Cross-Currency Heding: The Case of Asean-5-Based Grain and Soft Commodity Traders. SSRN Electronic Journal.
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Hsiang-Tai Lee. (2010) Regime Switching Fractional Cointegration and Futures Hedging. SSRN Electronic Journal.
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