OPTIMAL RATIO EVALUATION AND HEDGE EFFECTIVENESS OF AGRICULTURAL COMMODITIES NEGOTIATED AT B3 WITH GARCH-BEKK MODEL USE

Objective: To estimate the optimal ratio and hedge effectiveness for the main commodities traded at B3. Fundamentals: The futures market through futures contracts provides the economic agent called a hedger to protect itself from the volatility of the spot market. Futures contracts allow such an agent to "lock" the price of the financial product up to the maturity date by paying a premium to the trading counterparty, that is, the hedger can eliminate the risk of market price variation via a hedge transaction.. Method: The estimations of the optimal ratios and hedge effectiveness were performed using a GARCH-BEKK model. For comparison purposes, a static model was also used, in this case, the MQO model. The commodities that have B3 futures contracts chosen were crystal sugar, live cattle, 6/7 Arabica coffee, hydrated ethanol, corn and soybeans. The time window used was from December 2013 to December 2016 with daily frequency. Results: Estimating the ratios and effectiveness considering the entire sample does not produce satisfactory hedge coverage. However, when we treat structural breaks from fractionation of the series and apply an HP filter, performance improves significantly. Contributions: Test the performance of the BEKK model with a large group of commodities and, at the same time, seeking to improve the efficiency of the hedge with the application of a time series smoothing filter and with the treatment of structural breaks through the series fractionation. Provide the agricultural producer with an ideal hedge position in real time, allowing abrupt changes in the market to be incorporated into the risk position, thus ensuring that agribusiness management is more efficient and realistic.