Abstract
The risk transfer function of futures market is mainly realized by hedging strategy. Futures price yield and spot price yield tend to show different fluctuations before and during hedging, which leads to the distortion of hedging ratio, that is, the calculated hedging effect is weaker than the traditional hedging effect. On the basis of MV (minimum variance) hedging model, this paper introduces NGCM (nonlinear grey classification model) to solve the nonlinear correlation between futures and spot returns, which can improve the hedging effect. The results show that, due to the existence of basis, the price change model violates the linear assumption of OLS (ordinary least squares) parameters, and there is a problem of model missetting. It is estimated that HR (hedging ratio) should choose the price model, which can better depict the linkage between futures price and spot price. The effectiveness of HR in this study is higher than that of existing models. Applying this model to hedge can effectively avoid the spot price risk. Investors can reasonably choose the hedging model according to their own needs.
Highlights
With the development of the futures market, the risk transfer function of futures contracts has been paid more and more attention, and futures contracts have been widely used for hedging in the spot market
Barbi and Romagnoli [8] applied the binary copula function with analytic parameters to the calculation of MVHR of copper futures contracts, which simplifies the estimation of copula distribution function value, and the effectiveness of hedging is better than the traditional hedging model
In describing the correlation of variables in MV hedging, the traditional linear correlation coefficient can no longer meet the requirement of accurately describing the nonlinear and dynamic correlation between variables. erefore, when calculating MVHR, a great deal of research has been done on time-varying parameter methods and some nonlinear correlation indicators, and many achievements have been made [9, 10]. e correlation measure derived from the pair copula
Summary
With the development of the futures market, the risk transfer function of futures contracts has been paid more and more attention, and futures contracts have been widely used for hedging in the spot market. The futures market derived transactions for the purpose of speculation and arbitrage during its development, its primary function is as a hedging tool that enables enterprises to cope with the deteriorating market environment, achieve the goal of avoiding risks and locking in costs, and ensure the healthy and stable development of enterprises [5]. Hedgers determine the trading positions in spot market and futures market according to the expected return and variance of portfolio investment, so as to minimize the risk or maximize the utility [6, 7]. Is paper analyzes NGCM (nonlinear grey classification model) and tries to find a model suitable for estimating HR (hedging ratio) in Chinese enterprises, which is of great importance to the hedging operation of Chinese enterprises, based on the serious deviation between MVHR research and practice, combined with the practical purpose of enterprise hedging When the futures or spot markets fluctuate significantly, a nonlinear relationship often emerges, resulting in hedging failure [12]. is paper analyzes NGCM (nonlinear grey classification model) and tries to find a model suitable for estimating HR (hedging ratio) in Chinese enterprises, which is of great importance to the hedging operation of Chinese enterprises, based on the serious deviation between MVHR research and practice, combined with the practical purpose of enterprise hedging
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