Minimum variance hedge ratios for stock index futures: duration and expiration effects

Article Abstract:

There is an expected increase in the minimum variance hedge ratio for MMI and Standard and Poor's 500 stock index futures contracts with increasing hedge duration. This duration effect is influenced by an equality of future price and cash price that results when hedge duration nears contract expiration. The increase in minimum variance hedge ratio as hedges near contract expiration date is confirmed by ordinary least square and restricted least square regression methods. Minimum variance hedge ratio moves toward the beta hedge ratio at contract expiration.

Models, Stock index futures, Standard and Poor's 500-Stock Price Index

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Supplementary information and Markov processes in soybean futures trading

Article Abstract:

The technical indicators used in soybean futures trading are examined using the Markov chain analysis. The Markov indicator assumes there is movement from one market situation to all other possible situations. These situations are changes in price, volume and open interest given a certain period of time. Directional changes made in previous studies focused on price levels other supplementary information considered insignificant. Certain market conditions show characteristics of strong indicators of reversals.

Markov processes, Commodity futures, Futures, Soybean, Soybeans

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The significance of hedging capital requirements

Article Abstract:

The significance of capital requirements in the analysis of hedging strategy depends upon futures market positions and a hedger's attitude towards risk, particularly in maximizing utility. The level of reserve capital requirements and transaction cost incurred may be increased by using hedging strategies. The ratio of quantities hedged divided by quantities held in the cash market serves as a test for gauging the effects of capital requirements on trading costs.

Finance, Measurement, Futures market, Futures markets, Capital formation, Statistical hypothesis testing

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