Hedging Effectiveness with CNX Bank Nifty and Nifty Futures: VECH (Ht) Approach

Abstract

CNX bank nifty trading performance represents the state of Indi an banking sector and thereby evaluates the socio-economic objectives. Using bivariate LGARCH (1, 1) model for both C X bank nifty and nifty futures this study found that there persist long-run relationship between the spot and futures prices and thus returns. Here, this study calculated the futures prices with the usual cost of carry model considering the call rate as th proxy for the financing rate. This tudy also found that the hedge rahos for both the index futures are negative and caused the market as imperfect one. ln this situa ti on, investment decision requires the optimal investment preferences and choices with resource ge nerations and diversifications. The study confirms that th ere is a living run relationship between the spot and future prices and hence returns exist for both the index futures.