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Marcelo Brutti Righi and Paulo Sergio Ceretta
''Copula based Dynamic Hedging Strategy with Futures''
( 2012, Vol. 32 No.4 )
We present in this paper a dynamic hedging strategy for futures based exclusively on copula functions. We develop an algorithm based on numerical simulations from estimated copula and marginal probability function to obtain innovations. We illustrate our approach through an empirical example with Crude Oil and Gold. OLS static estimate showed itself improper and the proposed algorithm obtained very good results in spot/future variance reduction strategy.
Keywords: Dynamic Hedging Strategy, Future Markets, Copula Functions.
Manuscript Received : Sep 03 2012 Manuscript Accepted : Dec 19 2012

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