An Empirical Study on Hedging Performance of the Direct Hedge of KTB Futures by VECM and ECT-GARCH in Korea
Authors:   Asia-Europe Perspective Association, Kim Do-Hyeong , Oh Chang-Hyuck , Yim Byung-Jin 
Published: June 2018

This study investigates optimal hedging strategy with the KTB futures in Korean bond market. This study used the spot and Futures(KTB) of Treasury bond investment to risk management purposes, the traditional regression analysis model of minimum variance model, present in the futures market, and achievement considering the vector error correction models at relationships VECM(Vector Error Correction Model) and ECT-GARCH models use model hedge ratio, hedge performance comparison and analysis of research. Analysis of the period of 2008-12-30 ~ 2010-12-17, liquidity, the highest last-water (near by) close to 500 days of gifts, and data. Other specimens (out-of sample) is November 1, 2010 through December 17, 2010 until 35 days of release.
In General, the traditional regression analysis model of minimum variance hedge ratios are estimated as a model for a time series of estimates due to instability (nonstationary) are likely to be wrong. Time series data of instability caused by the could do them is estimated as a model and ECT-GARCH model is becoming widely used VECM. Therefore, this study presents and ECT-GARCH model County, VECM target percentage of the estimated hedge and traditional regression analysis model of minimum variance hedge ratio is estimated using mock-ups of a hedge and vs and analyzed. An empirical analysis of the study summarized results.
First, the time series data for the unit but the reliability of the results of the black spot price and the price are all fireKTBKTB futures stable. But after the first calm all the time series data were OK come stable. Second, the spot price and the KTB futures price is between KTB achievement: relations exist.
Third, the hedge model is the difference between a star hedge and not statistically significant. This is the investors in government bonds futures hedge ratio, hedge if you assume a minimum variance model means that the users. Hedge ratio but at present prices, spot prices, considering the relationship between the achievement of more refined compared to the models' minimum variance hedge performance VECM achieves.
An empirical analysis of the results, taking into account all the above, government bonds, investors in the futures market, the time series of the attribute or the hedge ratio to elaborate and innovative hedge models without using a simple minimum dispersion models only also can get a good hedge performance: conclusions In other words, the time series of current and Futures hedge ratio of fire stable materials at the time of the attribute or the variability, and so without considering the general minimum variance hedge ratio and vector have been estimated by the model of error correction model (VECM), ECT-GARCH models estimate that there is significant hedge rates significantly. “found Therefore, bond, a bond investment fund manager to the General investors or the bond risk management for hedge, hedge ratio, if you wish to modify the model(VECM) or ECT-GARCH is a vector error model to estimate the minimum variance regression model, than the easiest model can be used to estimate.
The study had limitations in the future, additional research to summarize as follows. First of all, in this study, KTB, the gift base daily rate hedging. estimated to come Most of the bonds in the case of a long term investment and invested compared to data of the issue, the use of the materials for the next bonus days in KTB futures and spot market once weekly, daily, such as material, also regarding the estimated hedge ratio, research is needed. Second, this study requires a minimum variance model, vector error correction model (VECM), ECT-GARCH (Autoregressive Conditional Heteroskedasticity Term-Generalized Error Correction) model study on estimation of the ratio of a hedge, but come. However, it is also necessary for future research on the different models.