Improvement of Hedging on Stock Price Volatility Based on Fundamental Securities in Emerging Financial Markets

摘要

The stock price volatility in emerging financial markets could be hedged by some innovative financial engineering methods without derivatives. In this paper, it is explored how to apply the principle of portfolio to hedge stock price volatility risk in emerging financial markets like China. This hedging portfolio involves the stock and a zero-coupon bond that deducting from the former. This portfolio can effectively eliminate stock price volatility and empirical results show that 91.74% of the risk is removed.