Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim
Recent researchers found that Crude Palm Oil Futures contract (FCPO) in Bursa Malaysia Derivatives is no longer an effective hedging tool to mitigate the price risk in cash market due to the excessive speculation trading activities. This is very alarming to the hedgers hence possible hedge pair alte...
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Universit Teknologi MARA Cawangan Selangor
2019
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| Online Access: | https://ir.uitm.edu.my/id/eprint/29331/1/AJ_AHMAD%20DANIAL%20ZAINUDIN%20JEEIR%20B%2019.pdf https://ir.uitm.edu.my/id/eprint/29331/ https://journal.uitm.edu.my/ojs/index.php/JEEIR/ |
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| author | Zainudin, Ahmad Danial Ahmad, Noryati Abdul Rahim, Fahmi |
| author_facet | Zainudin, Ahmad Danial Ahmad, Noryati Abdul Rahim, Fahmi |
| author_sort | Zainudin, Ahmad Danial |
| building | Tun Abdul Razak Library |
| collection | Institutional Repository |
| content_provider | Universiti Teknologi Mara |
| content_source | UiTM Institutional Repository |
| continent | Asia |
| country | Malaysia |
| description | Recent researchers found that Crude Palm Oil Futures contract (FCPO) in Bursa Malaysia Derivatives is no longer an effective hedging tool to mitigate the price risk in cash market due to the excessive speculation trading activities. This is very alarming to the hedgers hence possible hedge pair alternatives to crude palm oil physical must be identified to ensure that the hedging can be executed effectively. Therefore in this study, Ordinary Least Square, bivariate VAR and bivariate VECM were used to examine whether the non-interrelated energy futures contracts could serve as effective cross-hedging mechanisms for the CPO. Weekly data of agricultural and energy futures contracts from Intercontinental Exchange (ICE), New York Mercantile Exchange (NYMEX), and Tokyo Commodity Exchange (TOCOM) are employed to cross hedge the physical crude palm oil prices. The study starts from 2006 until 2016. Empirical results indicate that bivariate VECM gives more hedging variance reduction. Surprisingly, overall FCPO is still the best futures contract for hedging purposes while Japanese crude oil futures (TOCOM) represents the energy futures market as the best cross hedge alternatives for CPO. |
| format | Article |
| id | my.uitm.ir-29331 |
| institution | Universiti Teknologi Mara |
| language | en |
| publishDate | 2019 |
| publisher | Universit Teknologi MARA Cawangan Selangor |
| record_format | eprints |
| spelling | my.uitm.ir-293312020-04-08T14:27:19Z https://ir.uitm.edu.my/id/eprint/29331/ Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim jeeir Zainudin, Ahmad Danial Ahmad, Noryati Abdul Rahim, Fahmi Palms Oils, fats, and waxes Recent researchers found that Crude Palm Oil Futures contract (FCPO) in Bursa Malaysia Derivatives is no longer an effective hedging tool to mitigate the price risk in cash market due to the excessive speculation trading activities. This is very alarming to the hedgers hence possible hedge pair alternatives to crude palm oil physical must be identified to ensure that the hedging can be executed effectively. Therefore in this study, Ordinary Least Square, bivariate VAR and bivariate VECM were used to examine whether the non-interrelated energy futures contracts could serve as effective cross-hedging mechanisms for the CPO. Weekly data of agricultural and energy futures contracts from Intercontinental Exchange (ICE), New York Mercantile Exchange (NYMEX), and Tokyo Commodity Exchange (TOCOM) are employed to cross hedge the physical crude palm oil prices. The study starts from 2006 until 2016. Empirical results indicate that bivariate VECM gives more hedging variance reduction. Surprisingly, overall FCPO is still the best futures contract for hedging purposes while Japanese crude oil futures (TOCOM) represents the energy futures market as the best cross hedge alternatives for CPO. Universit Teknologi MARA Cawangan Selangor 2019-05-31 Article PeerReviewed text en https://ir.uitm.edu.my/id/eprint/29331/1/AJ_AHMAD%20DANIAL%20ZAINUDIN%20JEEIR%20B%2019.pdf Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim. (2019) Journal of Emerging Economies and Islamic Research (JEEIR) <https://ir.uitm.edu.my/view/publication/Journal_of_Emerging_Economies_and_Islamic_Research_=28JEEIR=29/>, 7 (2). pp. 1-17. ISSN 2289-2559 https://journal.uitm.edu.my/ojs/index.php/JEEIR/ |
| spellingShingle | Palms Oils, fats, and waxes Zainudin, Ahmad Danial Ahmad, Noryati Abdul Rahim, Fahmi Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title | Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title_full | Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title_fullStr | Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title_full_unstemmed | Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title_short | Effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / Ahmad Danial Zainudin, Noryati Ahmad and Fahmi Abdul Rahim |
| title_sort | effective cross hedging: evidence from physical crude palm oil and its non-interrelated energy futures contracts / ahmad danial zainudin, noryati ahmad and fahmi abdul rahim |
| topic | Palms Oils, fats, and waxes |
| url | https://ir.uitm.edu.my/id/eprint/29331/1/AJ_AHMAD%20DANIAL%20ZAINUDIN%20JEEIR%20B%2019.pdf https://ir.uitm.edu.my/id/eprint/29331/ https://journal.uitm.edu.my/ojs/index.php/JEEIR/ |
| url_provider | http://ir.uitm.edu.my/ |