Objective Diversification of Dynamic Hedging

원문 초록

A hedging objective reflects the risk preference of the hedger, so the conventional approach is to estimate the hedge ratio directly under the chosen objective. This paper asks whether that estimate should be used alone. We construct five objective-specific rolling hedge-ratio estimators---minimum variance, least absolute deviation (LAD), downside semivariance, lower-tail quantile, and Expected Shortfall (ES)---from the same historical stock--market returns, and combine the resulting estimates under a fixed final evaluation objective. Separate multi-output ExtraTrees models predict the within-stock-date ranks of the five candidates under MSE, LAD, downside semivariance, and 10\% quantile loss. The design uses pre-specified 60-, 90-, 120-, and 180-day windows with objective-matched rolling estimators as benchmarks. Adaptive weighting improves the corresponding loss in all sixteen objective--window comparisons. Equal weighting, which uses the same objective-specific hedge ratios without state variables or learned reweighting, already improves downside and quantile hedging. The results therefore suggest that estimates generated under other objectives can be useful even when the final hedging preference and evaluation objective are fixed, while adaptive weighting can provide a further improvement.