Optimal hedging of quantitative risk based on Markov regime change in coin futures contract Sayyed Mohammad Reza Davoodi 1 , Marzieh Karami Chamgordani 2 , Sayyed AmirReza Hashemi 3 Received: 01/01/2023 Accepted: 04/04/2023 Extended Abstract Introduction The stock market is one of the ways of financing for companies and one of the methods of earning money for investors. The risk caused by price fluctuations and how to deal with it is one of the concerns of activists and economic and financial theorists. In addition to disrupting the possibility of accurate business planning, unpredictable price fluctuations also include adverse welfare effects. The risk hedging strategy includes a secondary investment whose price moves mainly in the opposite direction of the primary investment (HongXing et al., 2023). This inverse price movement of two assets makes the investor expect less risk, while the expected profit is also reduced to achieve this goal (Naeimzadeh et al., 2023). The risk coverage ratio is a concept related to the hedged portfolio that defines the ratio between two assets. So far, there have been many quantifications of the concept of risk, among which criteria such as standard deviation or half standard deviation can be mentioned. The last two measures will be successful when the return distribution closely follows a normal distribution. Meanwhile, the results of many researches have shown that there is a significant difference between the return distribution of financial assets from the normal distribution in kurtosis and skewness. Therefore, the need to use other metrics and other possible distributions in modeling is justified. Value at risk and value at conditional risk are among them (Samavi et al., 2022). In these estimates, probability distributions have a special place. Therefore, in the current research, the role of probability distributions in calculating these two risk measures and the optimal risk coverage ratio for the 1. Department of Management, Dehaghan Branch, Islamic Azad University, Dehaghan, Iran. (Corresponding Author). smrdavoodi@ut.ac.ir 2. Department of Finance, Yazd University, Yazd, Iran. 3. Department of Management, Dehaghan Branch, Islamic Azad University, Dehaghan, Iran. How to cite this paper: Davoodi, S. M. R., Marzieh Karami Chamgordani, M., Hashemi, S. A. (2023). Optimal hedging of quantitative risk based on Markov regime change in coin futures contract. Advances in Finance and Investment, 4(2), 31-56. [In Persian] https://doi.org/10.30495/afi.2023.1966058.1152 Journal of Advances in Finance and Investment Volume 4, Issue 2 , 2023 pp. 31-56. Paper type: Research paper