The Research of The Optimal Hedge Ratios and Hedge Performarce For Domestic Short Term Interest Rate Futures

[[abstract]]The purpose of this research is to estimate optimal hedge ratio and compare hedge performance by using Naive model , OLS model and VECM model . The data include Taiwan 30-Day Commercial Paper Futures and Taiwan 10-Day , 90-Day , 180-Day Commercial Paper . The major results are as follows? 1. By using unit roots testing of all data , we find that the significance of unit roots and the nonstationarity of the price series . Hence , price series should be differenced to induce stationary . 2. The result of cointegration test has shown that there is a long-run equilibrium relationships between spot and futures prices . Consequently , a cointegration measure can be taken into account in the hedge model . 3. We find the same result in detecting the effects of in-of sample periods and out-of sample periods . The OLS model performs more well than all other hedge models for Taiwan 30-Day Commercial Paper Futures , and the VECM model is the second best . The results also has indicated that the VECM model can not improve the hedge performance . The portfolio including Taiwan 30-Day Commercial Paper Futures and Taiean 90-Day Commercial Paper can make the best hedge performance