Journal of Econometric Modelling

Journal of Econometric Modelling

Study the Optimal Hedge Ratio in Exchange Rate and gold in developing and newfound financial Markets: Case Study of Tehran Stock Exchange and Istanbul

Document Type : Original Article

Authors
Mohsen Mehrara 1
Naser Elahi 2
saeed Eslami Bidgoli 3
Atefeh Shahabadi Farahani 4
1 Economic Department, University of Tehran
2 Associate Professor, Mofid University Faculty Member
3 Assistant Professor, Faculty Member in Alame University saeed@eslamibidgoli.com
4 Student in PhD in economics
10.22075/jem.2018.16015.1214
Abstract
The main aim of this study is to investigate the possibility of hedging the risk of exchange rate fluctuations by using the gold future market and comparing the risk hedge in Tehran Exchange Stock as a developing financial market with the Istanbul Exchange stock as a newfound financial market. In order to access the research goal, daily data from December 13, 2007 to April 30, 2018 was used for Iran and March 18,2013 to August 17,2018 used for turkey and the Markov-Switching Model was used.
The results of this study showed that the coefficient of the future price of gold coins for zero regime (low swing) was 0/0013. For regime one (much swing), the future gold price coefficient was 0/0046. On the other hand, the results of this study showed that the coefficient for future changes in gold prices for the Istanbul Exchange in zero regime (low swing) was 0/00061 and for regime one (much swing), the coefficient of future price changes of gold was 0/0075 .
Keywords
The optimal hedge ratio
cash exchange rate
futures market
cross hedging Markov-Switching Model