MultivariateHedgingPortfolio {ConnectednessApproach}

Multivariate Hedging Portfolio

Description

This function calculates the multivariate hedging portfolio of Cocca et al. (2024)

Usage

MultivariateHedgingPortfolio(
  x,
  H,
  method = c("cumsum", "cumprod"),
  statistics = c("Fisher", "Bartlett", "Fligner-Killeen", "Levene", "Brown-Forsythe"),
  metric = "StdDev",
  digit = 2
)

Arguments

x

zoo return matrix (in percentage)

H

Residual variance-covariance, correlation or pairwise connectedness matrix

method

Cumulative sum or cumulative product

statistics

Hedging effectiveness statistic

metric

Risk measure of Sharpe Ratio (StdDev, VaR, or CVaR)

digit

Number of decimal places

Value

Get hedge ratios

Author(s)

David Gabauer

References

Cocca, T., Gabauer, D., & Pomberger, S. (2024). Clean energy market connectedness and investment strategies: New evidence from DCC-GARCH R2 decomposed connectedness measures. Energy Economics.

Ederington, L. H. (1979). The hedging performance of the new futures markets. The Journal of Finance, 34(1), 157-170.

Antonakakis, N., Cunado, J., Filis, G., Gabauer, D., & de Gracia, F. P. (2020). Oil and asset classes implied volatilities: Investment strategies and hedging effectiveness. Energy Economics, 91, 104762.

Examples

data("g2020")
fit = VAR(g2020, configuration=list(nlag=1))
mhp = MultivariateHedgingPortfolio(g2020/100, fit$Q)
mhp$TABLE