Considering time-varying transition probability (TVTP), this article combines Markov regime switching with a dynamic conditional correlation generalized autoregressive conditional heteroscedasticity (DCC-GARCH) model to construct a new hedging model and study a state-dependent minimum variance hedging ratio. A two-stage maximum likelihood method is constructed to estimate the model parameters. A filtering algorithm is used in an estimation process. Empirical results on commodity futures hedging show that compared with other benchmark models, the proposed one has the best fitting effect. In addition, in terms of hedging effectiveness, the proposed model is superior to other models in most cases, which means that introducing TVTP into a DCC-GARCH model can effectively improve the performance of hedging portfolio. Note to Practitioners—This article deals with a state-dependent minimum variance hedging problem. It combines a time-varying Markov regime switching with dynamic conditional correlation generalized autoregressive conditional heteroscedasticity named DCC-GARCH to construct a new hedging model and estimates a state-dependent hedging ratio. Empirical results from commodity futures hedging show that introducing TVTP into the DCC-GARCH model can effectively reduce portfolio risk and provide better hedging performance than other traditional models, including Markov regime switching DCC-GARCH with a fixed transition probability, DCC-GARCH, ordinary least squares, na_ve hedging strategies, and unhedged spots. Thus, this article is of guiding significance for hedgers to fully learn the hedging rules of futures market and avoid the spots price risk.

中文翻译：

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基于时变马尔可夫DCC-GARCH模型的方差最小化套期保值分析


考虑时变转移概率（TVTP），本文将马尔可夫状态切换与动态条件相关广义自回归条件异方差（DCC-GARCH）模型相结合，构建新的对冲模型，并研究状态相关的最小方差对冲比率。构建两阶段最大似然法来估计模型参数。在估计过程中使用过滤算法。商品期货套期保值的实证结果表明，与其他基准模型相比，所提出的模型拟合效果最好。此外，在对冲有效性方面，所提出的模型在大多数情况下优于其他模型，这意味着将TVTP引入DCC-GARCH模型可以有效提高对冲组合的性能。从业者注意——本文讨论的是状态相关的最小方差对冲问题。它将时变马尔可夫状态切换与动态条件相关广义自回归条件异方差（DCC-GARCH）相结合，构建新的对冲模型并估计状态相关的对冲比率。商品期货套期保值的实证结果表明，在DCC-GARCH模型中引入TVTP可以有效降低投资组合风险，并且比其他传统模型（包括固定转移概率的马尔可夫政权切换DCC-GARCH、DCC-GARCH、普通最小模型）提供更好的套期保值性能正方形、幼稚的对冲策略和未对冲的点。因此，本文对于套期保值者充分了解期货市场的套期保值规则，规避现货价格风险具有指导意义。