A Critique of Minimum Variance Hedging
Abstract
This paper provides a critique of minimum variance hedging using futures. The paper develops the conventional minimum variance hedge ratio (MVHR) and discusses its estimation. A review of the wide variety of alternative methods used to construct MVHRs is then performed. These methods highlight many of the potential limitations in the conventional framework. The paper argues that the literature should focus more on the assumptions underlying the conventional MVHR, rather than improving the techniques used to estimate the conventional MVHR.
Keywords
Citation
Dark, J. (2005), "A Critique of Minimum Variance Hedging", Accounting Research Journal, Vol. 18 No. 1, pp. 40-49. https://doi.org/10.1108/10309610580000674
Publisher
:Emerald Group Publishing Limited
Copyright © 2005, Emerald Group Publishing Limited