International Journal of Banking andFinance

Volume 1, Issue 2 2003 Article 1

Cross hedging jet fuel on the Singapore spotmarket

Ephraim Clark∗ Mark Tan†

Radu Tunaru‡

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Copyright c©2003 by the authors. International Journal of Banking and Finance is produced byThe Berkeley Electronic Press (bepress). http://epublications.bond.edu.au/ijbf

Cross hedging jet fuel on the Singapore spotmarket

Ephraim Clark, Mark Tan, and Radu Tunaru

Abstract

In this paper we test for the most effective cross hedging instrument for the Singapore spotmarket in jet fuel over the period February 4, 1997 to August 21, 2001. Our results are mixed. Wefind that the heating oil contract is the best in-sample cross-hedging instrument. It has the highestcorrelation with the spot price and gives the best regression results. However, after correcting forserial correlation, the goodness of fit measured by R2 is rather low. Out of sample results are weakfor all models and ambiguous with respect to the heating oil contract.

KEYWORDS: cross hedging, Singapore spot market, jet fuel

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1

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Clark et al.: Cross hedging jet fuel on the Singapore spot market

Produced by The Berkeley Electronic Press, 2003

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International Journal of Banking and Finance, Vol. 1, Iss. 2 [2003], Art. 1

http://epublications.bond.edu.au/ijbf/vol1/iss2/1