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Reinforcement Learning For Dynamic Futures Hedging, Evan Bullard
Reinforcement Learning For Dynamic Futures Hedging, Evan Bullard
All Graduate Plan B and other Reports, Spring 1920 to Spring 2023
This paper focuses on oil hedging using near month crude oil futures. Hedging may allow a firm to reduce risks and focus on areas of comparative advantage. Hedging requires a firm to estimate ex-ante the correct hedge ratio. The portfolio optimization framework allows for OLS to be applied to the estimation of a hedge ratio. Reinforcement Learning is another method available to hedgers to estimate a hedge ratio. Three strategies using econometric tools and one using Reinforcement Learning are estimated and tested against 2019 oil price data.