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THE EFFECTIVENESS OF ROLLING THE HEDGE FORWARD IN THE TREASURY BILL FUTURES MARKET

THE EFFECTIVENESS OF ROLLING THE HEDGE FORWARD IN THE TREASURY BILL FUTURES MARKET THE EFFECTIVENESS OF ROLLING THE HEDGE FORWARD IN THE TREASURY BILL FUTURES MARKET George M. McCabe, University of Nebraska Charles T. Franckle, First City Bancorporation There are currently eight Treasury bill futures contracts listed, one for each of the next eight calendar quarters. It is thus possible to hedge a purchase or sale of a short term (90 day) financial instrument any time in the next two years by purchasing or selling the matching Treasury bill futures contract. It is not possible to hedge purchases or sales of short-term instruments beyond this two year period, in this way as the matching futures contracts are not available. This paper examines a technique called rolling the hedge forward. This involves hedging say a purchase of T bills nine quarters in the future by buying the existing eighth contract then selling it and buying the newly available ninth contract when it is listed. It was found that this technique is quite effective, at least in the Treasury bill futures market. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Financial Review Wiley

THE EFFECTIVENESS OF ROLLING THE HEDGE FORWARD IN THE TREASURY BILL FUTURES MARKET

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References (3)

Publisher
Wiley
Copyright
Copyright © 1982 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0732-8516
eISSN
1540-6288
DOI
10.1111/j.1540-6288.1982.tb00101.x
Publisher site
See Article on Publisher Site

Abstract

THE EFFECTIVENESS OF ROLLING THE HEDGE FORWARD IN THE TREASURY BILL FUTURES MARKET George M. McCabe, University of Nebraska Charles T. Franckle, First City Bancorporation There are currently eight Treasury bill futures contracts listed, one for each of the next eight calendar quarters. It is thus possible to hedge a purchase or sale of a short term (90 day) financial instrument any time in the next two years by purchasing or selling the matching Treasury bill futures contract. It is not possible to hedge purchases or sales of short-term instruments beyond this two year period, in this way as the matching futures contracts are not available. This paper examines a technique called rolling the hedge forward. This involves hedging say a purchase of T bills nine quarters in the future by buying the existing eighth contract then selling it and buying the newly available ninth contract when it is listed. It was found that this technique is quite effective, at least in the Treasury bill futures market.

Journal

The Financial Review – Wiley

Published: Jul 1, 1982

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