Cross-Hedging: Basis Risk and Choice of the Optimal Hedging Vehicle.
The basis between a futures contract and its underlying instruments is an important measure of the cost of using the futures contract to hedge. In a cross-hedge, the relative size of the basis of alternative hedging vehicles often plays a decisive role in the selection of the optimal hedging vehicle. After adjusting hedge ratios for basis risk, a genuine risk-cost trade-off is seen in hedging ninety-day certificates of deposit with either the Treasury bill contract or the Eurodollar contract. The Eurodollar contract was not uniformly superior as generally believed. Copyright 1991 by MIT Press.
Year of publication: |
1991
|
---|---|
Authors: | Castelino, Mark G ; Francis, Jack C ; Wolf, Avner |
Published in: |
The Financial Review. - Eastern Finance Association - EFA. - Vol. 26.1991, 2, p. 179-210
|
Publisher: |
Eastern Finance Association - EFA |
Saved in:
Saved in favorites
Similar items by person
-
Mutual Fund Systematic Risk for Bull and Bear Markets: An Empirical Examination.
Fabozzi, Frank J, (1979)
-
Basis Volatility: Implications for Hedging
Castelino, Mark G, (1989)
-
Bonds versus stocks : investors' age and risk taking
Bali, Turan G., (2009)
- More ...