An Examination of Dynamic Cross Hedging —Evidence from the Exchange Rate of NTD against US Dollar

• Main Authors: Rojian Tzeng, 曾榮健
• Other Authors: Yih-Wen Shyu
• Format: Others
• Language: zh-TW
• Published: 2002
• Online Access: http://ndltd.ncl.edu.tw/handle/91128258196610791580

碩士 === 長庚大學 === 企業管理研究所 === 90 === Abstract Due to the absence of currency futures market for NT dollar, this research aims to hedge the NTD/US exposure via cross hedging with respect to six currency futures, including Australian Dollar, British Pound, Canadian Dollar, Deutsche Mark, Japanese Yen, and Swiss Franc. This research compares the hedging effectiveness between the static model (OLS) and the dynamic model (Bivariate GARCH). The results are summarized as following： 1. Bivariate GARCH model seems to outperform OLS model. This is because spot price is not consistent with futures price, resulting in the instability of variance/covariance structure. Moreover, the dynamic characteristic of the Bivariate GARCH model also makes the hedging effectiveness better off. 2. The remarkable hedging effectiveness, under Bivariate GARCH model, of currency futures for in-sample comparison during different periods are Swiss Franc, Japanese Yen, and Australian Dollar, respectively. For out-of-sample comparison, they are Deutsche Mark (one-day and one-week hedging period) and Swiss Franc (two-week hedging period). 3. In in-sample comparison, it reveals that long hedge periods could improve hedging performance. But it is not obvious in out-of-sample comparison.