[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/brf/journl/v9y2011i3p365-382.html
   My bibliography  Save this article

Hedge Effectiveness in the Brazilian US Dollar Futures Market

Author

Listed:
  • Marcelo Cabus Klotzle

    (Pontifícia Universidade Católica do Rio de Janeiro)

  • Antonio Carlos Figueiredo Pinto

    (Pontifícia Universidade Católica do Rio de Janeiro)

  • Mario Domingues Simões
  • Leonardo Lima Gomes

    (Pontifícia Universidade Católica do Rio de Janeiro)

Abstract
In recent years, one could observe a very definite surge in dollar prices in Brazil. Many Brazilian Companies, especially those with large amounts of dollar denominated debt incurred substantial losses due to the strong and fast growth of the dollar. The subsequent dollar price collapse from 2002 to 2008 caused great losses to exporters. In the context of hedge being a form of protection against currency oscillations, this paper aimed to study its effectiveness using the dollar future market in the BM&FBovespa. Specifically, four alternatives for calculating the optimum hedge ratio were compared: a) the so called naïve approach, where opposite positions are taken in the spot and future markets; b) OLS – Ordinary Least Squares c) symmetric bi-variate GARCH (Generalized Autoregressive Conditional Heteroscedasticity); d) asymmetric bi-variate GARCH. The results showed that both GARCH supported hedge ratios presented higher effectiveness when compared to OLS, with in turn surpassed the naïve one.

Suggested Citation

  • Marcelo Cabus Klotzle & Antonio Carlos Figueiredo Pinto & Mario Domingues Simões & Leonardo Lima Gomes, 2011. "Hedge Effectiveness in the Brazilian US Dollar Futures Market," Brazilian Review of Finance, Brazilian Society of Finance, vol. 9(3), pages 365-382.
    • Handle: RePEc:brf:journl:v:9:y:2011:i:3:p:365-382
    as

    Download full text from publisher

    File URL: http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/download/2800/2275
    Download Restriction: no
    File URL: http://bibliotecadigital.fgv.br/ojs/index.php/rbfin/article/view/2800
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Hegde; US-Dollar Futures Market; Garch Models;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:brf:journl:v:9:y:2011:i:3:p:365-382. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marcio Laurini (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.