[R-sig-finance] minimum variance hedge ratio
snvk4u at gmail.com
Mon Sep 19 09:27:05 CEST 2005
i have two data sets, spot and futures cash market prices. to estimate
the minimum variance hedge ratio, i first had a glance on the
correlation coefficient of relative price change (ln(St / St-1).
surprizingly the value is just 0.2 compared to actual price
correlation of 0.9. (i did regress the spot change on future change,
co-effi is 0.3, and R2 is only 0.025
a) in such scenario can someone help me in estimating the ratio which
are time varying.
b) is there a way to define the function as the correlation will work
at given level of basis (futures - spot).
thank u for the help and co-operation
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