Thesis (MBA)--Stellenbosch University, 2003. / ENGLISH ABSTRACT: When hedging with futures contracts the hedge ratio is one of the fundamental figures needed
to set up a successful hedging strategy. The Mean Variance framework has been used for
some time to calculate hedge ratios for this exact purpose.
Certain assumptions are implicit in the Mean Variance framework such as the assumed
normality of returns and assumed quadratic utility functions of investors. The validity of these
assumptions has been questioned in the literature. The Mean Gini framework is first and
second order stochastically dominant implying that there is no assumption regarding the
return process or the utility function of investors. This study compares these two frameworks
regarding the hedge ratios generated by each and their subsequent hedging effectiveness.
The results indicate that neither one of the two frameworks generate the most effective hedge
ratios all the time. The Mean Gini framework is, however, preferred above the Mean Variance
framework for a significant number of futures contracts evaluated.
It can therefore be concluded that making use of the Mean Variance framework for all futures
contracts would have resulted in numerous ineffective hedging situations. / AFRIKAANSE OPSOMMING: Wanneer verskansing met termynkontrakte gedoen word is, die verskansingsverhouding een
van die fundamentele veranderlikes waaroor 'n besluit geneem moet word. Vir 'n geruime tyd
word die Minimum Variansie verskansingsverhouding vir hierdie doel gebruik.
Implisiet in die Minimum Variansie raamwerk is die aannames dat opbrengste normaal
verdeel is en dat die beleggersnutsfunksie kwadraties van aard is. Die geldigheid van hierdie
aannames het reeds heelwat kritiek in die literatuur ontlok. Die Gemiddelde Gini raamwerk is
eerste en tweede graads stochasties dominant, wat impliseer dat geen aannames aangaande die
opbrengs of die beleggersnutsfunksie gemaak word nie. Die studie vergelyk beide raamwerke
rakende die verskansingsverhoudings deur elk gegenereer en die gepaardgaande
verskansingdoeltreffendheid.
Die resultate toon dat nie een van die twee raamwerke vir alle kontrakte die mees effektiewe
verskansingsverhouding genereer nie. Die Gemiddelde Gini raamwerk word egter vir 'n
beduidende aantal van die termynkontrakte bestudeer bo die Minimum Variansie raamwerk
verkies.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/53640 |
| Date | 12 1900 |
| Creators | Van Niekerk, Leon |
| Contributors | Smit, E. vd M., Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | 59 p. : ill. |
| Rights | Stellenbosch University |
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