The minimum variance hedge ratio under stochastic interest rates

• 成果类型: Article
• 署名作者: Lioui, A; Poncet, P
• 署名单位: Bar Ilan University; heSam Universite; Universite Pantheon-Sorbonne; ESSEC Business School
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.46.5.658.12045
• 发表日期: 2000
• 页码: 658-668
• 关键词: hedge ratio; stochastic interest rates; forwards; futures

摘要

In an environment where interest rates are stochastic, we examine the case of a pure hedger endowed with a fixed position in a long term bond. In contrast to conventional wisdom according to which the difference between hedging through forward contracts and futures is immaterial, it turns out that the minimum variance hedge ratio using forwards comprises two terms instead of one only when using futures. The magnitude of the difference between the two hedge ratios may be important under some plausible assumptions. This result is due to the presence of additional interest rate risk that bears on the profit-and-loss statement associated with the forward position. This sheds some additional light on the respective features of forward and futures contracts written on interest rate-sensitive securities.