Optimal dynamic hedging strategies with financial futures contracts using nonlinear conditional heteroskedastic models.

TL;DRAbstract

The theme of this dissertation is dynamic hedging strategies. In simple terms, hedging means guarding against risk. In the context of financial investment, hedging refers to risk reduction by transferring the risk of return to others, as opposed to the approach of portfolio diversification. A dynamic hedging strategy is an investment strategy involving the ongoing reallocation of financial assets over time, with the goal of attaining the desired return on investment with minimum risk by hedging. Many financial instruments are called derivative instruments, or contingent claims for they so exist and are priced only because of the existence and the prevailing price levels of some underlying securities. They fall into two main categories, namely, futures contracts and options. Both of these can be effectively used as hedging tools. In this dissertation, we focus on using financial futures contracts as a hedging tool and consider the problem of searching for an optimal dynamic hedging stra

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