Risk Measurement And Hedge In Future Markets

Future market is more and more important to the economic system with the development of China. Furthermore , stock index future can be exchanged in Chinese stock markets now, so the future markets can influent financial market more deeply. Hedging is one of the most important roles for future markets, so studying on optimal hedge ratio can make future markets more efficient.This paper research on risk measurement and the optimal hedge ratio in Chinese market based on theoretical analysis and empirical research . So it can be divided into two parts.The first part is risk measurement in future markes. Firstly, we introduce several methods of risk measurement, and then estimate VaR for Shanghai copper future market in three different periods by five kinds of methods. Considering the skewness and tail characteristics we developed a new model to estimate risk, it works better in Chinese future markets. At last, we exam the asymmetric effects of basis to the risk structure, then we develop a model named AE-GARCH to measure the risk of Chinese future markets.We study on optimal hedge ratio models in the second part of this paper. Considering the influence of basis to the spot markets and future markets while the cointegration between spot markets and future markets, we eatimated the optimal hedge ratio for Shanghai future market. The results show that the hedge result is improved, and it makes the future market more efficiency.Then we estimated the optimal hedge rate considering the skewness of return of HS300 index future in order to maximize the utility of traders.