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Hedging Effectiveness of Energy Exchange Traded Funds

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Hedging Effectiveness of Energy Exchange Traded Funds

Gao, Yan (2012) Hedging Effectiveness of Energy Exchange Traded Funds. Masters thesis, Concordia University.

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Abstract

This thesis examines the hedging effectiveness of energy Exchange Traded Funds (ETFs). ETFs provide small investors the opportunity to hedge against the risk of price changes in commodities such as crude oil, instead of using commodity futures contracts to hedge, which require a high initial margin. In this thesis, I address the hedging effectiveness of energy ETFs in hedging against fluctuations in the price of crude oil. I apply various models of hedging such as the minimum variance hedge ratio model (MVHR) in which the measure of risk is the variance of the change in the value of the hedged portfolio, and other models in which the measure of risk is the value at risk (VaR), the conditional value at risk (CVaR) and modified value at risk (MVaR) of the hedged portfolio. I investigate the hedging effectiveness of energy ETFs in both in-sample and out-of-sample periods. My results indicate that energy ETFs are effective in reducing the risks associated with fluctuation in the price of crude oil.

Divisions:Concordia University > John Molson School of Business > Finance
Item Type:Thesis (Masters)
Authors:Gao, Yan
Institution:Concordia University
Degree Name:M. Sc.
Program:Administration (Finance option)
Date:29 June 2012
Thesis Supervisor(s):Shanker, Latha
ID Code:974437
Deposited By:YAN GAO
Deposited On:30 Oct 2012 14:24
Last Modified:30 Oct 2012 14:24
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