Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel

Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel

Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishi...

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Main Author: Turner, Peter Alistair
Format: Others
Published: North Dakota State University 2018
Online Access:https://hdl.handle.net/10365/27250
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spelling ndltd-ndsu.edu-oai-library.ndsu.edu-10365-272502021-09-28T17:10:55Z Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel Turner, Peter Alistair Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishing the best cross-hedging asset. Airlines hedging with futures would create the most effective hedge by using 3-month maturity contracts of heating oil. 3- Month maturity contracts are slightly more effective as hedging tools than the next month, but beyond the 3-Month veil, increased maturity makes heating oil less effective as a cross hedging tool. Upper Great Plains Transportation Institute (UGPTI) 2018-01-17T20:36:40Z 2018-01-17T20:36:40Z 2014 text/thesis https://hdl.handle.net/10365/27250 NDSU policy 190.6.2 https://www.ndsu.edu/fileadmin/policy/190.pdf application/pdf North Dakota State University
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sources NDLTD
description Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishing the best cross-hedging asset. Airlines hedging with futures would create the most effective hedge by using 3-month maturity contracts of heating oil. 3- Month maturity contracts are slightly more effective as hedging tools than the next month, but beyond the 3-Month veil, increased maturity makes heating oil less effective as a cross hedging tool. === Upper Great Plains Transportation Institute (UGPTI)
author Turner, Peter Alistair
spellingShingle Turner, Peter Alistair
Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
author_facet Turner, Peter Alistair
author_sort Turner, Peter Alistair
title Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
title_short Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
title_full Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
title_fullStr Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
title_full_unstemmed Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel
title_sort determining the optimal commodity and hedge ratio for cross-hedging jet fuel
publisher North Dakota State University
publishDate 2018
url https://hdl.handle.net/10365/27250
work_keys_str_mv AT turnerpeteralistair determiningtheoptimalcommodityandhedgeratioforcrosshedgingjetfuel
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