Journal of Investment Strategies

Risk.net

Hedging iTraxx credit default swap index trading on an intraday basis: an empirical study

Cheng-Ran Du and Tim Brunne

ABSTRACT

We consider the equity and Bund futures as financial instruments to hedge standard 5Y iTraxx Europe Main and Crossover indexes. Our analysis is based on a four-month intraday time series for traded prices and quoted spreads, respectively. We find that a DAX futures based intraday hedging strategy is the most efficient one. While the cross-asset hedging strategy reduces the intraday market risks of iTraxx Europe positions, the overall hedging efficiency is limited.

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