The purpose of this paper is to measure the effectiveness of the hedging with futures currency contracts. Measuring the effectiveness of hedging has become mandatory for Indian companies as the new Indian accounting standards, Ind-AS, specify that the effectiveness of hedges taken by the companies should be evaluated using quantitative methods but leaves it to the company to choose a method of evaluation.,The paper compares three models for evaluating the effectiveness of hedge – ordinary least square (OLS), vector error correction model (VECM) and dynamic conditional correlation multivariate GARCH (DCC-MGARCH) model. The OLS and VECM are the static models, whereas DCC-MGARCH is a dynamic model.,The overall results of the study show that dynamic model (DCC-MGARCH) is a better model for calculating the hedge effectiveness as it outperforms OLS and VECM models.,The new Indian accounting standards (Ind-AS) mandates the calculation of hedge effectiveness. The results of this study are useful for the treasurers in identifying appropriate method for evaluation of hedge effectiveness. Similarly, policymakers and auditors are benefitted as the study provides clarity on different methods of evaluation of hedging effectiveness.,Many previous studies have evaluated the efficiency of the Indian currency futures market, but with rising importance of hedging in the Indian companies, Reserve Bank of India’s initiatives and encouragement for the use of futures for hedging the currency risk and now the mandatory accounting requirement for measuring hedging effectiveness, it has become more relevant to evaluate the effectiveness of hedge. To the authors’ best knowledge, this is one of the first few papers which evaluate the effectiveness of the currency future hedging.

中文翻译：

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印度货币期货市场的对冲和有效性

本文的目的是衡量期货货币合约对冲的有效性。由于新的印度会计准则Ind-AS规定，对冲有效性的衡量已成为印度公司的强制性规定，应采用定量方法评估公司对冲的有效性，但应由公司选择评估方法。，本文比较了三种评估套期保值有效性的模型-普通最小二乘（OLS），矢量误差校正模型（VECM）和动态条件相关多元GARCH（DCC-MGARCH）模型。OLS和VECM是静态模型，而DCC-MGARCH是动态模型。研究的总体结果表明，动态模型（DCC-MGARCH）优于OLS和VECM模型，是计算对冲有效性的更好模型。新的印度会计准则（Ind-AS）要求对冲有效性的计算。这项研究的结果对于财务人员确定合适的评估对冲有效性的方法很有用。同样，决策者和审计师也从中受益，因为该研究为对冲有效性的评估方法提供了清晰的说明。许多先前的研究已经评估了印度货币期货市场的效率，但是对冲在印度公司中的重要性越来越高，印度储备银行的举措和鼓励是使用期货对冲货币风险，现在是衡量对冲有效性的强制性会计要求，因此评估对冲的有效性变得越来越重要。据作者所知，这是评估货币期货对冲有效性的首批论文之一。