Hedging strategies of Energy Commodities
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Abstract:
The paper examines the issue of hedging in energy markets. The objective of this study is to select an optimal model that will provide the highest price risk reduction for the selected commodities. We apply the ordinary least squares methods, autoregressive model, autoregressive conditional heteroscedasticity and copula to calculate the appropriate dynamic minimum-variance hedge ratio. The objects of hedging are the spot and futures prices. We use weekly data for the period 2013 to 2018 to estimate our values. Empirical results show that the Copula model is the most effective method for hedging against price risks. JEL Classification: G13, C58, C22 Keywords: Hedging Risk, Future contract, Minimum variance, Copula
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Journal title
volume 16 issue 65
pages 103- 135
publication date 2020-07
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