An Application of COPULA-GARCH-Based Model to the Hedging Effectiveness of Foreign Exchange Hedging Portfolio

• Main Authors: Wen-Chun Chen, 陳玟珺
• Other Authors: 莊忠柱
• Format: Others
• Language: zh-TW
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/3d389s

碩士 === 淡江大學 === 管理科學學系碩士班 === 106 === In the recent years, the global economic environment has rapidly changed. To avoid the huge exchange loss, it is critical for investors and investment institutions to build a hedging portfolio. We adopts window-rolling framework from February 2, 1987 and March 29, 2018 to examine hedging effectiveness of different distribution with(Normal distribution and Student t distribution) bivariate DCC COPULA-GARCH(1,1) and ADCC COPULA-GARCH(1,1), this study focuses on USD/JPY using the New York FX Market’s spot markets prices and the Chicago Mercantile Exchange futures markets prices. According to the bivariate COPLUA-GARCH-Based model, it can be found that there is a high degree of correlation between spot market and futures in the foreign exchange market. From the results, it is found that COPULA GARCH-Based models with different distribution can capture the dependent structures of the two markets and construct the minimum variance hedging portfolio to create the best hedging performance. The results reveal that hedging effectiveness of the Student t distribution with ADCC COPLUA-GARCH (1,1) model are better than the normal distribution with ADCC COPLUA-GARCH (1,1) model.