risk.hedge: Computes optimal hedging ratios based on risk measures

In riskR: Risk Management

Description

Determines optimal hedging ratios based on risk measures (StD, VaR, EL, ELD, ES, SDR, EVaR, DEVaR, ENT, DENT, ML) by minimization of position risk.

Usage

risk.hedge(x, y, alpha = c(0.05), beta = 1, p = 2)

Arguments

x	a vector of observations.
y	a vector of observations of the asset used for hedging.
alpha	a vector of probabilities for significance level.
beta	a positive risk aversion parameter.
p	a positive value for the power of deviation terms.

Value

A matrix with values of optimal hedging ratios for each risk measure at all probabilities of interest.

Examples

## computes optimal hedging ratios between AAPL and SP500.

data(returns)
s <- returns[, 3]
h <- returns[, 2]
risk.hedge(s, h, c(0.01, 0.05))

Example output

               1%          5%
StD     0.7185660   0.7185660
VaR     0.3152324   0.6207591
EL    -19.9999499 -19.9999499
ELD     0.4122224   0.4122224
ES      1.2061494   0.5531925
SDR     1.2061231   0.5531922
EVaR    0.3801064   0.5574525
DEVaR   0.4315027   0.5475013
ENT   -12.8619631 -12.8619631
DENT    0.4146286   0.4146286
ML     -4.6265431  -4.6265431

riskR documentation built on May 2, 2019, 1:43 p.m.