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Optimal Hedging Ratio Model with Skewness
Authors:Long-bin ZHANG  Chun-feng WANG  Zhen-ming FANG
Affiliation:Financial Engineering Research Center, Tianjin University, Tianjin 300072, China
Abstract:In this article, we develop an optimal hedging ratio model with skewness and derive the analytical solution of the optimal hedging ratio which can degenerate to mean-variance hedging ratio when co-skewnesses of spot and futures returns become zero. The empirical results suggest that the hedging model with skewness performs better than the traditional mean-variance hedging model.
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