RT Report
T1 Currency hedging strategies, strategic benchmarks and the Global and Euro Sovereign financial crises
A1 Caporin, Massimiliano
A1 Jiménez Martín, Juan Ángel
A1 González Serrano, Lydia
AB This paper investigates dynamic currency hedging benefits, with a further focus on the impact of currency hedging before and during the recent financial crises originated from the subprime and the Euro sovereign bonds. We take the point of view of a Euro-based institutional investor who considers passive investment strategies in portfolios holding European, British and US assets. We analyze the impact of the model specification to improve the risk-return tradeoff when currency risk is hedged. Hedging strategies of currency risk, using exchange rates futures and driven by several multivariate GARCH models, depend on the portfolio composition and period analyzed. Dynamic covariance models provide limited evidences of a decrease in hedging rations compared to naïve hedging strategies based on linear regressions or variance smoothing. Nevertheless, those results are coupled with better performances of dynamic covariance models in terms of hedging effectiveness an improved Sharpe ratios. The empirical evidences are observed both in-sample as well as in an out-of-sample exercise.
YR 2013
FD 2013
LK https://hdl.handle.net/20.500.14352/41519
UL https://hdl.handle.net/20.500.14352/41519
LA eng
NO JEL codes: C32, C53, C58, G01, G11, G15, G17, G23, G32.  The first author acknowledges financial support from MIUR PRIN project MISURA - Multivariate Statistical Models for Risk Assessment and from the European Union, Seventh Framework Programme FP7/2007-2013 under grant agreement SYRTO-SSH-2012-320270. The second author acknowledges financial support of the Ministerio de Ciencia y Tecnología of Spain through the research project ECO2012-31941.  University of Padova, Department of Economics and Management “Marco Fanno”, e-mail: massimiliano.caporin@unipd.it Complutense University of Madrid, Department of Quantitative Economics, e-mail: juanangel@ccee.ucm.es. Corresponding author  Rey Juan Carlos University, Department of Business Administration.
NO Multivariate Statistical Models for Risk Assessment and from the European Union, Seventh Framework Programme  FP7/2007-2013
NO Ministerio de Ciencia y Tecnología of Spain
DS Docta Complutense
RD 6 abr 2025