1.
Kapil Gupta
– Punjab Inst. Of Mgt (pim), I. K. Gujral Punjab Technical University, Kapurthala, Punjab, India.
2.
Mandeep Kaur
– Punjab Inst. Of Mgt (pim), I. K. Gujral Punjab Technical University, Kapurthala, Punjab, India.
Abstract
Present study examines the efficiency of futures contracts in hedging unwanted price risk over highly volatile period i.e. June 2000 - December 2007 and January 2008 – June 2014, pre and post-financial crisis period, by using S&PC NXNIFTY, CNXIT and BANKNIFTY for near month futures contracts. The hedge ratios have been estimated by using five methods
namely Ederingtons Model, ARMA-OLS, GARCH
(p,q), EGARCH (p,q) and TGARCH (p,q). The study
finds that hedging effectiveness increased during post crisis period for S&PC NXNIFTY and BANKNIFTY. However, for CNXIT hedging effectiveness was better during pre-crisis period than post crisis. The study also finds that time-invariant hedge ratio is more efficient than time-variant hedge ratio.
Keywords Hedge Ratio, Hedge Horizon, Basis Risk, Heteroscedasticity, Conditional Volatility
