Date of Award
2014
Publisher
North Dakota State University
Document Type
Thesis
Degree Awarded
Master of Science (MS)
Program
Agribusiness and Applied Economics
Department
Agribusiness and Applied Economics
College
Agriculture, Food Systems and Natural Resources
Faculty Advisor
Lim, Siew H.
Description
Airlines are exposed to risks in swings in the price of jet fuel. While there are many different options that they can use to hedge this risk, airlines often underutilize them. This study establishes the minimum variance hedge ratio for an airline wishing to hedge with futures, while also establishing the best cross-hedging asset. Airlines hedging with futures would create the most effective hedge by using 3-month maturity contracts of heating oil. 3- Month maturity contracts are slightly more effective as hedging tools than the next month, but beyond the 3-Month veil, increased maturity makes heating oil less effective as a cross hedging tool.
Recommended Citation
Turner, Peter Alistair, "Determining the Optimal Commodity and Hedge Ratio for Cross-Hedging Jet Fuel" (2014). Agribusiness and Applied Economics. 56.
https://digitalcommons.ndsu.edu/agribusiness-applied-econ/56
Rights
NDSU policy 190.6.2
Rights Link
https://www.ndsu.edu/fileadmin/policy/190.pdf
Handle Identifier
https://hdl.handle.net/10365/27250