A note on minimum riskiness hedge ratio

This note incorporates the riskiness indexes of Aumann and Serrano (2008) and Foster and Hart (2009) into the futures hedging framework. It is shown that the minimum FH riskiness hedge strategy does not exist whereas the minimum AS riskiness hedge ratio tends to be smaller than the conventional minimum variance hedge ratio. Empirical results using daily spot and futures prices of S&P500 and FTSE100 indices over the 2009 to 2013 period support the theoretical prediction.