Minimizing Risk Techniques for Hedging Jet Fuel: an Econometrics Investigation
نویسندگان
چکیده
The aim of this paper is to discuss the hedging techniques that a company based in an emerging market country can use to hedge the risk associated with jet fuel or kerosene. The company can be an airline company or a market intermediary offering contracts on this important commodity. An empirical analysis reveals two main directions for minimum risk hedging: one is to cross-hedge directly the commodity itself using the futures contract on another commodity or a basket of commodities highly correlated with jet fuel; the second is to use the futures contract on kerosene in Tokyo and then the problem is transformed into cross hedging the currency. JEL classification: G13, G15, F31
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