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http://dx.doi.org/10.7737/KMSR.2014.31.1.049

A Study on the Strategies of Hedging System Trading Using Single-Stock Futures  

Kim, Sun Woong (국민대학교 비즈니스IT전문대학원)
Choi, Heung Sik (국민대학교 비즈니스IT전문대학원)
Kim, Nam-Hyun (국민대학교 비즈니스IT전문대학원, 아바커스시스템(주))
Publication Information
Korean Management Science Review / v.31, no.1, 2014 , pp. 49-61 More about this Journal
Abstract
We investigate the hedging effectiveness of incorporating single-stock futures into the corresponding stocks. Investing in only stocks frequently causes too much risk when market volatility suddenly rises. We found that single-stock futures help reduce the variance and risk levels of the corresponding stocks invested. We use daily prices of Korean stocks and their corresponding futures for the time period from December 2009 to August 2013 to test the hedging effect. We also use system trading technique that uses automatic trading program which also has several simulation functions. Moving average strategy, Stochastic's strategy, Larry William's %R strategy have been considered for hedging strategy of the futures. Hedging effectiveness of each strategy was analyzed by percent reduction in the variance between the hedged and the unhedged variance. The results clearly showed that examined hedging strategies reduce price volatility risk compared to unhedged portfolio.
Keywords
Stock Trading; Single-Stock Futures; System Trading; Hedge Strategies; Hedging Effectiveness;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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