This paper derives optimal hedge ratios with infrequent extreme news events modeled as common jumps in foreign currency spot and futures rates. A dynamic hedging strategy based on a bivariate GARCH model augmented with a common jump component is proposed to manage currency risk. We find...

This paper investigates whether Bitcoin can hedge and diversify risk against the Euro STOXX, Nikkei, Shanghai A-Share, S&P 500, and the TSX Index, and examines the dynamics of these abilities over different data frequencies. Pairwise GARCH models and constant conditional correlation models are...

A dynamic hedging strategy based on a bivariate GARCH-jump model augmented with autoregressive jump intensity is proposed to manage currency risk. The GARCH-jump model, capable of capturing volatility clustering and leptokurtosis, provides a comprehensive description of the joint dynamics of the...