A dynamic hedging approach for refineries in multiproduct oil markets
Ji, QA; Fan, Y
2011
Source PublicationENERGY
ISSN0360-5442
Volume36Issue:2Pages:7,881-887
AbstractA multiproduct portfolio hedge ratio strategy for oil futures is investigated using a multivariate GARCH model based on dynamic conditional correlation and an error correction model (DCC-ECM-MVGARCH). By considering the characteristics of refiner profits from crack spread and the mutual relations among crude oil, gasoline and heating oil spot and future prices, we estimate the time-varying optimal hedge ratios for the oil-cracking margin. In addition, a naive strategy, a traditional OLS model and dynamic B-GARCH model are selected to compare with our model for hedge effectiveness. Comparison of hedge effectiveness for in-sample and out-of-sample data reveals that the dynamic DCC-ECM-MVGARCH model is more sensitive to market fluctuations, provides a more accurate description of changes in volatility and has more advantages than other models. Therefore, the empirical results prove that application of the DCC-ECM-MVGARCH model for hedging of oil market portfolio can play an important role in avoiding the double risk of crude oil and oil product markets for refineries. (C) 2010 Elsevier Ltd. All rights reserved.
KeywordHedge Garch Dynamic Conditional Correlation
Subject AreaThermodynamics ; Energy & Fuels
Indexed BySCI
Language英语
WOS IDWOS:000288102600020
Citation statistics
Cited Times:16[WOS]   [WOS Record]     [Related Records in WOS]
Document Type期刊论文
Identifierhttp://ir.casisd.cn/handle/190111/4343
Collection中国科学院科技政策与管理科学研究所(1985年6月-2015年12月)
Recommended Citation
GB/T 7714
Ji, QA,Fan, Y. A dynamic hedging approach for refineries in multiproduct oil markets[J]. ENERGY,2011,36(2):7,881-887.
APA Ji, QA,&Fan, Y.(2011).A dynamic hedging approach for refineries in multiproduct oil markets.ENERGY,36(2),7,881-887.
MLA Ji, QA,et al."A dynamic hedging approach for refineries in multiproduct oil markets".ENERGY 36.2(2011):7,881-887.
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