The impact of skewness in the hedging decision

The impact of skewness in the hedger's objective function is tested using a model of hedging derived from a third‐order Taylor Series approximation of expected utility. To determine the effect of price skewness upon hedging and speculation, analytical results are derived using an example of cotton storage. Findings suggest that when forward risk premiums and price skewness in the spot asset have opposite signs, speculation increases relative to the mean‐variance model. When the signs are identical, speculation will decrease, contradicting findings of mean‐variance models. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:503–520, 2006     

Pricing and hedging illiquid energy derivatives: An application to the JCC index

In this paper a simple strategy for pricing and hedging a swap on the Japanese crude oil cocktail (JCC) index is discussed. The empirical performance of different econometric models is compared in terms of their computed optimal hedge ratios, using monthly data on the JCC over the period January 2000–January 2006. An explanation to how to compute a bid/ask spread and to construct the hedging position for the JCC swap contract with variable oil volume is provided. The swap pricing scheme with backtesting and rolling regression techniques is evaluated. The empirical findings show that the price‐level regression model permits one to compute more precise optimal hedge ratios relative to its competing alternatives. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:464–487, 2008     

Exports and hedging exchange rate risks: the multi‐country case

This article examines the optimal production, export allocation, and hedging decisions of a risk‐averse international firm that exports to several foreign markets with different currencies. The firm faces multiple exchange rate risks. Optimal decisions are analyzed under two scenarios. In the first, there is a forward market for one currency only. Then, the export allocation to different markets is separable from the firm's preferences and the joint distribution of the exchange rates. In contrast, total production is not separable except for a special case. In the second scenario, there is a forward market for each currency. Then, both production and export allocation are separable. Hedging with forward contracts depends on risk premia and on the joint distribution of the exchange rates. If tradable exchange rate risk is a linear function of untradable exchange rate risk plus noise, there is a conflict between cross hedging and taking a basis risk. If, alternatively, the untradable exchange rate risk is a linear function of the tradable exchange rate risk and noise, there is no such conflict. A speculative position in a biased forward market for one currency can be cross hedged using an unbiased forward market for another currency. © 2000 John Wiley & Sons, Inc. Jrl Fut Mark 20:843–864, 2000.     

浅析套期保值中棉花套利的应用

套保套利是指以规避现货价格风险为目的的期货交易行为.企业开展套保套利交易,是将期货市场当作转移价格风险的场所,利用期货合约作为将来在现货市场上买卖商品的临时替代物,对其现在买进但准备以后售出的商品或对将来需要买进的商品的价格进行"锁定"的交易活动.套保套利的本质在于"风险对冲"和"风险转移".     

An empirical analysis of the relationship between the hedge ratio and hedging horizon: A simultaneous estimation of the short‐ and long‐run hedge ratios

This article analyzes the effects of the length of hedging horizon on the optimal hedge ratio and hedging effectiveness using 9 different hedging horizons and 25 different commodities. We discuss the concept of short‐ and long‐run hedge ratios and propose a technique to simultaneously estimate them. The empirical results indicate that the short‐run hedge ratios are significantly less than 1 and increase with the length of hedging horizon. We also find that hedging effectiveness increases with the length of hedging horizon. However, the long‐run hedge ratio is found to be close to the naïve hedge ratio of unity. This implies that, if the hedging horizon is long, then the naïve hedge ratio is close to the optimum hedge ratio. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:359–386, 2004     

The effects of structural breaks and long memory on currency hedging

Empirical evidence suggests that unconditional variance of exchange rate return series is subject to occasional structural breaks that may induce spurious phenomenon of high persistence and long memory of volatility processes. In this study, we investigate the effects of such breaks on estimated risk-minimizing hedge strategies (ratios) and their performance in currency markets. Using bivariate GARCH (BGARCH) and fractionally integrated GARCH models, we estimate the hedge ratios for six foreign currencies in the full sample with and without controlling for breaks and each subsample of different unconditional variance regimes identified by a modified version of the Inclan C, and Tiao GC (1994) algorithm. Our findings suggest that daily currency risk can be better hedged with currency futures when controlling for unconditional variance breaks in the BGARCH model. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:607–632, 2010     

On the optimal mix of corporate hedging instruments: Linear versus nonlinear derivatives

We examine how corporations should choose their optimal mix of linear and nonlinear derivatives. We present a model in which a firm facing both quantity (output) and price (market) risk maximizes its expected profits when subjected to financial distress costs. The optimal hedging position generally is comprised of linear contracts, but as the levels of quantity and price‐risk increase, the use of linear contracts will decline due to the risks associated with overhedging. At the same time, a substitution effect occurs toward the use of nonlinear contracts. The degree of substitution will depend on the correlation between output levels and prices. Our model also allows us to provide insight into the relation between a firm's derivatives usage and its transaction‐cost structure. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:217–239, 2003     

The use of term structure information in the hedging of mortgage‐backed securities

This article examines the importance of term structure variables in the hedging of mortgage‐backed securities (MBS) with Treasury futures. Koutmos, G., Kroner, K., and Pericli, A. (1998) find that the optimal hedge ratio is time varying; we determine the effect of yield levels and slopes on this variation. As these variables are closely tied with mortgage refinancing, intuition suggests them to be relevant determinants of the hedge ratio. It was found that a properly specified model of the time varying hedge ratio that excludes the level and slope of the yield curve from the information set would provide similar out‐of‐sample hedging results to a model in which term structure information is included. Thus, both the level of interest rates and the slope of the yield curve are unimportant variables in determining the empirically optimal hedge ratio between MBS and Treasury futures contracts. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:661–678, 2005     

The design and pricing of fixed‐ and moving‐window contracts: An application of Asian‐Basket option pricing methods to the hog‐finishing sector

Asian‐Basket‐type moving‐window contracts are an increasingly used risk‐management tool in the North American hog sector. The moving‐window contract is decomposed into a portfolio of a long Asian‐Basket put and a short Asian‐Basket call option. A projected break‐even price is used to determine the floor price, and then Monte Carlo simulation methods are used to price both a moving‐ and a fixed‐window contract. These methods provide unbiased pricing of fixed‐ and moving‐window hog‐finishing contracts of 1‐year duration. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:1047–1073, 2003     

Exploring the effects of for‐profit and nonprofit size congruency: An exchange perspective on cause‐related marketing

Prior research on cause‐related marketing (CM) shows that congruencies between for‐profit and nonprofit organizational missions and target markets affect consumers' perceptions of the partnership fit, and their subsequent response to CM promotions. The current work explores how congruencies between for‐profit and nonprofit sizes influence consumers' perceptions of the partnership fit, and subsequently, their attitudes toward CM efforts. Study 1 shows that consumers perceive a low degree of organizational partnership fit between a small for‐profit and large nonprofit (relative to other partnership configurations). Study 2 shows the nature of donated resources can affect organizational partnership fit perceptions, such that donations of needed goods (vs. money) can improve consumers' perceptions of partnership fit between a small for‐profit and large nonprofit. Study 3 shows that organizational cause congruency and organizational size both independently contribute to perceptions of organizational partnership fit.     

Derivative pricing model and time‐series approaches to hedging: A comparison

This research compares derivative pricing model and statistical time‐series approaches to hedging. The finance literature stresses the former approach, while the applied economics literature has focused on the latter. We compare the out‐of‐sample hedging effectiveness of the two approaches when hedging commodity price risk using futures contracts. For various methods of parameter estimation and inference, we find that the derivative pricing models cannot out‐perform a vector error‐correction model with a GARCH error structure. The derivative pricing models' unpalatable assumption of deterministically evolving futures volatility seems to impede their hedging effectiveness, even when potentially foresighted optionimplied volatility term structures are employed. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:613–641, 2005     

The effects of culture on ethical decision-making: An application of Hofstede's typology

This paper addresses a significant gap in the conceptualization of business ethics within different cultural influences. Though theoretical models of business ethics have recognized the importance of culture in ethical decision-making, few have examinedhow this influences ethical decision-making. Therefore, this paper develops propositions concerning the influence of various cultural dimensions on ethical decision-making using Hofstede's typology.Scott J. Vitell is Associate Professor of Marketing and holder of the Michael S. Starnes Lecturship in Marketing and Business Ethics at the University of Mississippi. His work has previously appeared in theJournal of Macromarketing, theJournal of Business Ethics, Research in Marketing, and theJournal of the Academy of Marketing Science as well as various other journals and proceedings.Saviour Nwachukwu is a Ph.D. candidate in Marketing. His research interests include international marketing, marketing and economic development, and marketing ethics.James H. Barnes is Associate Professor of Marketing and Pharmacy Administration and holder of the Morris Lewis, Jr. Lectureship in Marketing at the University of Mississippi. His research has previously appeared in theJournal of Marketing Research as well as other journals and proceedings.     

Exploring word‐of‐mouth influences on travel decisions: friends and relatives vs. other travellers

Travel research consistently shows the importance of word‐of‐mouth (WOM) information sources in the travel decision‐making process. Friends and relatives have been identified as organic image‐formation agents, and it has been emphasized that this WOM information is one of the most relied‐upon sources of information for destination selection. While there has been recognition of the importance of WOM information sources on consumer behaviour in tourism, little has been performed to understand more specifically how and what behaviour is influenced. This study examined the differing influences of friends and relatives vs. other travellers on the travel choices and behaviours of 412 visitors to the North Queensland Region in Australia. More specifically, the present study compared the following four groups of respondents: those who indicated that they obtained travel information from friends/relatives and other travellers (n = 70); those who obtained information from friends/relatives only (n = 121); those who obtained information from other travellers only (n = 105); and those who obtained information from neither (i.e. no WOM) (n = 116). The results indicated that there were significant differences across the four groups with respect to demographic characteristics, other information sources used, accommodation and transportation used, and travel activities in the destination. However, the groups did not differ in their image of the destination.     

The effects of word‐of‐mouth consistency on persuasiveness

Word of mouth (WOM) consistency can be readily observed in online product evaluations. Previous studies on the influence of WOM consistency on purchase intentions have showed contradictory results. In this research, we identify how stronger persuasiveness of WOM is achieved when consistency, product type, and review content work together. Study 1 shows that regarding search goods, highly consistent factual reviews are more persuasive. Study 2 shows that concerning experience goods and credence goods, highly consistent experiential reviews have greater persuasiveness. However, low WOM consistency can also achieve stronger persuasiveness under some circumstances. Moreover, in Study 3, we replicate our findings and explore the possible underlying mechanism. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Estimation and hedging effectiveness of time‐varying hedge ratio: Flexible bivariate garch approaches

Bollerslev's ( 1990 , Review of Economics and Statistics, 52, 5–59) constant conditional correlation and Engle's (2002, Journal of Business & Economic Statistics, 20, 339–350) dynamic conditional correlation (DCC) bivariate generalized autoregressive conditional heteroskedasticity (BGARCH) models are usually used to estimate time‐varying hedge ratios. In this study, we extend the above model to more flexible ones to analyze the behavior of the optimal conditional hedge ratio based on two (BGARCH) models: (i) adopting more flexible bivariate density functions such as a bivariate skewed‐t density function; (ii) considering asymmetric individual conditional variance equations; and (iii) incorporating asymmetry in the conditional correlation equation for the DCC‐based model. Hedging performance in terms of variance reduction and also value at risk and expected shortfall of the hedged portfolio are also conducted. Using daily data of the spot and futures returns of corn and soybeans we find asymmetric and flexible density specifications help increase the goodness‐of‐fit of the estimated models, but do not guarantee higher hedging performance. We also find that there is an inverse relationship between the variance of hedge ratios and hedging effectiveness. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:71–99, 2010