Dynamic hedging strategies: An application to the crude oil market
Lautier, Delphine; Galli, Alain (2010), Dynamic hedging strategies: An application to the crude oil market, Séminaire du CERNA (Centre d'Economie Industrielle) Mines Paris-Tech, 2010-06, Paris, France
TypeCommunication / Conférence
Lien vers un document non conservé dans cette basehttp://ssrn.com/abstract=1579635
Titre du colloqueSéminaire du CERNA (Centre d'Economie Industrielle) Mines Paris-Tech
Date du colloque2010-06
Ville du colloqueParis
Pays du colloqueFrance
MétadonnéesAfficher la notice complète
Résumé (EN)This article analyses long-term dynamic hedging strategies relying on term structure models of commodity prices and proposes a new way to calibrate the models which takes into account the errors associated to the hedge ratios. Different strategies, with maturities up to seven years, are tested on the American crude oil futures market. The study considers three recent and efficient models respectively with one, two, and three factors. The continuity between the models makes it possible to compare their performances which are judged on the basis of the errors associated with a delta hedge. The strategies are also tested for their sensitivity to the maturities of the positions and to the frequency of portfolio rollover. We found that our method gives the best of two seemingly incompatible worlds: the higher liquidity of short-term futures contracts for the hedge portfolios, together with markedly improved performances. Moreover, even if it is more complex, the three-factor model is by far, the best.
Mots-clésDynamic Hedging; Commodities; Futures; Long-Term Commitment; Calibration
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