An empirical comparison of hedging strategies with financial futures and options on futures

Hedgingfixed rate mortgage (FRM) portfolios with financial futures and options is suggested to substitutes for the adjustable rate mortgage as the hedging instrument. This study examines the comparative benefits of hedging the FRM through selling futures, buying puts, and the combined buy-putlsell-c...

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Main Author:	Ramin Cooper Maysami
Format:	Article
Language:	English
Published:	Penerbit Universiti Kebangsaan Malaysia 1995
Online Access:	http://journalarticle.ukm.my/7966/ http://journalarticle.ukm.my/7966/ http://journalarticle.ukm.my/7966/1/801-1530-1-SM.pdf

id	ukm-7966
recordtype	eprints
spelling	ukm-79662016-12-14T06:45:47Z http://journalarticle.ukm.my/7966/ An empirical comparison of hedging strategies with financial futures and options on futures Ramin Cooper Maysami, Hedgingfixed rate mortgage (FRM) portfolios with financial futures and options is suggested to substitutes for the adjustable rate mortgage as the hedging instrument. This study examines the comparative benefits of hedging the FRM through selling futures, buying puts, and the combined buy-putlsell-call strategies in lowering the standard deviation of returns of the unhedged portfolio over the period 1983 to 1991. The results show that covering the FRM through futures and options markets strategies are successful in lowering the variability of returns. The relative advantage of each strategy in terms of the mean-standard deviation pairs, however, depends on the direction of interest rate movements. Since the primary purpose offinancial institutions in hedging interest rate risk associated with their portfolio of fixed rate mortgages is to prevent values from falling as well as to reduce the variability of returns, the use of put options and finanCial futures as the hedging instrument is recomended. Penerbit Universiti Kebangsaan Malaysia 1995 Article PeerReviewed application/pdf en http://journalarticle.ukm.my/7966/1/801-1530-1-SM.pdf Ramin Cooper Maysami, (1995) An empirical comparison of hedging strategies with financial futures and options on futures. Jurnal Pengurusan, 14 . pp. 81-104. ISSN 0127-2713 http://ejournals.ukm.my/pengurusan/issue/view/203
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Kebangasaan Malaysia
building	UKM Institutional Repository
collection	Online Access
language	English
description	Hedgingfixed rate mortgage (FRM) portfolios with financial futures and options is suggested to substitutes for the adjustable rate mortgage as the hedging instrument. This study examines the comparative benefits of hedging the FRM through selling futures, buying puts, and the combined buy-putlsell-call strategies in lowering the standard deviation of returns of the unhedged portfolio over the period 1983 to 1991. The results show that covering the FRM through futures and options markets strategies are successful in lowering the variability of returns. The relative advantage of each strategy in terms of the mean-standard deviation pairs, however, depends on the direction of interest rate movements. Since the primary purpose offinancial institutions in hedging interest rate risk associated with their portfolio of fixed rate mortgages is to prevent values from falling as well as to reduce the variability of returns, the use of put options and finanCial futures as the hedging instrument is recomended.
format	Article
author	Ramin Cooper Maysami,
spellingShingle	Ramin Cooper Maysami, An empirical comparison of hedging strategies with financial futures and options on futures
author_facet	Ramin Cooper Maysami,
author_sort	Ramin Cooper Maysami,
title	An empirical comparison of hedging strategies with financial futures and options on futures
title_short	An empirical comparison of hedging strategies with financial futures and options on futures
title_full	An empirical comparison of hedging strategies with financial futures and options on futures
title_fullStr	An empirical comparison of hedging strategies with financial futures and options on futures
title_full_unstemmed	An empirical comparison of hedging strategies with financial futures and options on futures
title_sort	empirical comparison of hedging strategies with financial futures and options on futures
publisher	Penerbit Universiti Kebangsaan Malaysia
publishDate	1995
url	http://journalarticle.ukm.my/7966/ http://journalarticle.ukm.my/7966/ http://journalarticle.ukm.my/7966/1/801-1530-1-SM.pdf
first_indexed	2023-09-18T19:51:07Z
last_indexed	2023-09-18T19:51:07Z
_version_	1777406225713987584

An empirical comparison of hedging strategies with financial futures and options on futures

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