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A Risk-Return Measure of Hedging Effectiveness: A Comment

Published online by Cambridge University Press:  06 April 2009

Jack S. K. Chang  and
Latha Shanker
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Abstract

This paper points out an error and implications of the error in the model of hedging effectiveness proposed by Howard and D'Antonio (1). The error would lead to ambiguous results if the model were used in practical applications to select the best hedging instrument. This paper proposes a new measure of hedging effectiveness that eliminates the error in the original model and resolves the ambiguity.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 3 , September 1987 , pp. 373 - 376
Copyright
Copyright © School of Business Administration, University of Washington 1987

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References

[1]Howard, C. T., and D'Antonio, L. J.. “A Risk-Return Measure of Hedging Effectiveness.” Journal of Financial and Quantitative Analysis, 19 (03 1984), 101–112.CrossRefGoogle Scholar