Date of Award

8-2020

Degree Type

Report

Degree Name

Master of Science (MS)

Department

Economics and Finance

Committee

Tyler Brough

Committee

Nicholas Flann

Committee

Pedram Jahangiry

Abstract

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.

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