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.

Scarpa, E., Manera, M. (2008). Pricing and hedging illiquid energy derivatives: an application to the JCC index. THE JOURNAL OF FUTURES MARKETS, 28(5), 464-487 [10.1002/fut.20296].

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

MANERA, MATTEO
2008

Abstract

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.
Articolo in rivista - Articolo scientifico
energy derivatives; JCC index; illiquid derivatives; swaps
English
2008
28
5
464
487
none
Scarpa, E., Manera, M. (2008). Pricing and hedging illiquid energy derivatives: an application to the JCC index. THE JOURNAL OF FUTURES MARKETS, 28(5), 464-487 [10.1002/fut.20296].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/317
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