Cross moments of extreme observai ions from a multtvariate lognormal distribution

Abstract

This paper considers order statistics Z and W from a trivariate lognormal vector (X₁,X₂,Y), where Z = min(X₁,X₂,) and W = max(X₁,X₂). The cross moments between Z (or W) and Y are characterized and compared to the cross moments between X_i and Y. The results are directly useful in evaluating and comparing the hedging effectiveness of futures markets.

Keywords:

• order statistics
• correlation coefficient
• futures market
• hedging effectiveness