The Research Of Minimum Variance HEDG Based On Dynamic Pair Copula

As a reseARCH hotspot in the field of financial mathematics both at home and abroad, The current study of Minimum variance hedging is mainly under the circumstances of two-dimensional variable, But with the Enhancement of the financial market dependence, building the high dimensional dependence structure in the Minimum variance hedging is better able to withstand risks of market fluctuations, The model makes more sense. Based on the two-dimensional Copula-GARCH model in the minimum variance hedging, The article uses the Pair Copula under rattan structure to creat the high dimensional correlation structure. the minimum variance hedging study by two dimensional state is extended to higher dimensions.The Copula function can capture the nonlinear information of the relationships between variables, and tail difference between futures and spot prices return to process a good description of the Minimum Variance Hedge.The Pair Copula technique not only retains the advantage of Copula function, but also be more flexible, less restrictive conditions than the multiple Copula function in the construction of high dimensional dependence structure,At the same time, this paper takes into account the minimum variance hedging portfolio is usually short, so combine the dynamic Pair Copula module in the use of Pair Copual decomposition constructing high dimensional correlation structure, in order to get the hedge ratio for minimum risk。When calculate the distribution of edge and forecast volatility, the article also considered the asymmetry of financial asset prices in Minimum Variance Hedge by the impact of information on the basis of the GARCH model。The artic studied the application of the minimum variance hedging based on EGARCH model and Pair Copula decomposition technique...