Efficient Futures Hedging of Bond Portfolios in Emerging Markets

Hedging bond portfolios using futures is often utilized in developed countries where the bond market is liquid and futures are considered quick and inexpensive way of eliminating risk. The EM bond market is underdeveloped. Asset managers lack instruments that allow them to efficiently hedge their portfolios. Standard financial textbooks do not offer any solutions to the problem of low quality data for efficient hedging. Normal distribution is assumed at all times. I offer an alternative approach to construct efficient hedging in low liquidity environments when data is not distributed normally