{"title":"Research on optimization strategy of futures hedging dependent on market state","authors":"","doi":"10.1016/j.apenergy.2024.123885","DOIUrl":null,"url":null,"abstract":"<div><p>Considering the dynamic nature of market conditions, this paper introduces a state-dependent futures hedging optimization model and methodology. This approach dynamically adjusts the traditional model-driven hedging strategy, effectively balancing the pursuit of returns with the imperative of risk mitigation. Empirical evidence shows that integrating Hidden Markov Model (HMM) with machine learning techniques, as demonstrated in this study, improves the accuracy of market state forecasts. Compared to the traditional model-driven hedging strategy, the innovative state-dependent hedging strategy introduced here significantly enhances the return-to-risk ratio, and revenue, without increasing hedging risks. Moreover, the hedging portfolio developed under this strategy achieves an average hedging efficiency of 0.76, highlighting the effectiveness of the proposed methodology. Additional robustness tests indicate that this market state-dependent hedging optimization strategy is promising under various conditions, including different position adjustment ratios, volatility benchmarks, evaluation periods, types of crude oil, and transaction costs. The research conducted in this paper not only contributes to and expands traditional hedging theories but also provides a practical risk management solution for market participants.</p></div>","PeriodicalId":246,"journal":{"name":"Applied Energy","volume":null,"pages":null},"PeriodicalIF":10.1000,"publicationDate":"2024-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Applied Energy","FirstCategoryId":"5","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0306261924012686","RegionNum":1,"RegionCategory":"工程技术","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ENERGY & FUELS","Score":null,"Total":0}
引用次数: 0
Abstract
Considering the dynamic nature of market conditions, this paper introduces a state-dependent futures hedging optimization model and methodology. This approach dynamically adjusts the traditional model-driven hedging strategy, effectively balancing the pursuit of returns with the imperative of risk mitigation. Empirical evidence shows that integrating Hidden Markov Model (HMM) with machine learning techniques, as demonstrated in this study, improves the accuracy of market state forecasts. Compared to the traditional model-driven hedging strategy, the innovative state-dependent hedging strategy introduced here significantly enhances the return-to-risk ratio, and revenue, without increasing hedging risks. Moreover, the hedging portfolio developed under this strategy achieves an average hedging efficiency of 0.76, highlighting the effectiveness of the proposed methodology. Additional robustness tests indicate that this market state-dependent hedging optimization strategy is promising under various conditions, including different position adjustment ratios, volatility benchmarks, evaluation periods, types of crude oil, and transaction costs. The research conducted in this paper not only contributes to and expands traditional hedging theories but also provides a practical risk management solution for market participants.
期刊介绍:
Applied Energy serves as a platform for sharing innovations, research, development, and demonstrations in energy conversion, conservation, and sustainable energy systems. The journal covers topics such as optimal energy resource use, environmental pollutant mitigation, and energy process analysis. It welcomes original papers, review articles, technical notes, and letters to the editor. Authors are encouraged to submit manuscripts that bridge the gap between research, development, and implementation. The journal addresses a wide spectrum of topics, including fossil and renewable energy technologies, energy economics, and environmental impacts. Applied Energy also explores modeling and forecasting, conservation strategies, and the social and economic implications of energy policies, including climate change mitigation. It is complemented by the open-access journal Advances in Applied Energy.