Inflation-Driven Derivative Investment Strategies: A Comparative Analysis of Chinese and US Enterprises in 2022

Abstract

Affected by the COVID-19 epidemic, the Russia-Ukraine conflict, climate change and other reasons, the global economy has shown an inflationary trend. In the context of inflation, governments and companies will bear different levels of risk. As a hedging tool, derivatives have become an important tool for all asset owners to fight against inflation risk. Through the comparative analysis of the derivative investment strategies of multiple enterprises in China and the United States in 2022, this paper tries to obtain the types of investment strategies of enterprises using derivative investment to combat inflation risk under the inflation. It has been observed that in 2022, enterprises primarily face inflation risks related to exchange rates, interest rates, and depreciation of enterprise value. In order to mitigate these risks, the formulation of the enterprise's derivative investment strategy takes into account various factors such as the enterprise's production and operation strategy, regional standard systems, and currency settlement types. Finally, based on comparative analysis, it is posited that enterprises exhibit a greater inclination towards employing interest rate and exchange rate derivatives as a means to mitigate inflation risk. In contrast, general investors can derive enhanced hedging functionality by utilizing commodity options and futures. However, when employing financial derivatives for investment purposes, one must consider the integrity of the derivatives market as well as the positioning within the industrial chain.