Hedging Effectiveness in the Index Futures Market

Abstract

In the textbook model of hedging an index, the solution to the problem is presented at its simplest. When a futures contract is available to track the index at all times, then one may use it to take a short position large enough to match the index holding one for one. More generally, if we recognize that in most cases the basis will not be continually zero, one can create a hedge in the same proportion (“the hedge ratio”) as the slope coefficient in the regression of the cash on the futures price. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 16 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.