In this work we try to identify, assess and evaluate the hedging performance of derivative
contracts on equity portfolios that are available in the financial markets. We specifically
focus on the use of future contracts, such as gold and oil futures, as hedgers on equity
indices. We first present in brief theory and basics of equity investments and financial
derivatives. We further focus on the concept of hedging and the uses and characteristics
of future contracts. The thesis continues with a literature review on how the optimal
hedge ratio is defined and how it can be estimated with the implementation of econometric
models. We then employ multivariate GARCH BEKK models in order to estimate the
dynamic conditional variance of the assets returns and evaluate the performance of their
hedge ratios. Finally, we discuss the results and conclude with investment proposals.
