The Futures Hedging Strategy Based on the Ratios between Profits and Risk
Lin Xiao-gui · Systems Engineering · 2004
In traditional hedge strategy, the hedge ratios are only solved according to minimizing basis. It has some shortcomings. For this situation, we consider both the profits and the risks in the futures hedge based on present price. So it is got the ratio between profits and risks. New hedge ratios are solved through maximizing the ratio between profits and risks. It is illuminated that the hedge ratio has good qualities. The traditional hedge is only a special case. In addition, the method is provided for that we judge the present price to fit short hedging or long hedging. The investor can better grasp the opportunity and the quantity for buying and selling.