%0 Journal Article
%T A New Range-Based Regime-Switching Dynamic Conditional Correlation Model for Minimum-Variance Hedging
%A Yi-Kai Su
%A Chun-Chou Wu
%J Journal of Mathematical Finance
%P 207-219
%@ 2162-2442
%D 2014
%I Scientific Research Publishing
%R 10.4236/jmf.2014.43018
%X <p align=\"justify\">
	<span style=\"font-family:Verdana;font-size:12px;\">This study proposes a new range-based Markov-switching dynamic conditional correlation (MSDCC) model for estimating the minimum-variance hedging ratio and comparing its hedging performance with that of alternative conventional hedging models, including the naive, OLS regression, return-based DCC, range-based DCC and return-based MS-DCC models. The empirical results show that the embedded Markov-switching adjustment in the range-based DCC model can clearly delineate uncertain exogenous shocks and make the estimated correlation process more in line with reality. Overall, in-sample and out-of sample tests indicate that the range-based MS-DCC model outperforms other static and dynamic hedging models.</span> 
</p>
%K Minimum-Variance Hedge Ratio
%K Markov-Switching
%K Correlation
%K Range-Based DCC Model
%K Regime Shift
%U http://www.scirp.org/journal/PaperInformation.aspx?PaperID=46379