Hedge Effectiveness in Copper Futures Market: Case study for "Erdenet" Mining Co.Ltd in Mongolia
|Autor:||Mgr. Baigali Khurelbaatar|
|Rok:||2015 - letní|
|Vedoucí:|| prof. PhDr. Ladislav Krištoufek Ph.D.
|Typ práce:|| Diplomová
Finance, finanční trhy a bankovnictví
|Abstrakt:||The objective of the thesis is to analyze the copper futures market in London Metal Exchange (LME)
and to recommend appropriate hedging strategy in copper futures market to the Erdenet Mining
Corporation in Mongolia. It uses daily official settlement copper prices of LME in the spot and 3 month
futures markets from 2000-2014. Initially, we use cointegration test and ECM to investigate the copper
market efficiency. Then OLS, ECM, GARCH, EGARCH and ECM-GARCH models are employed to
compute different optimum hedge ratios. Finally, the hedge effectiveness is measured based on
minimization of the value of AIC and SBIC. Our result indicate that copper futures market is inefficient.
Hedge effectiveness comparison concludes that ECM model gives the best hedging performance.
However, ECM-GARCH is accounted to be the best model for hedging strategy since it captures the
time-varying conditional heteroscedasticity to ECM model.