International Cotton Price Risk Management Research Based On VaR

China is a big country of textile industry,and it is the world's major producer of cotton,the world's largest consumer of cotton and the world's major cotton importing countries.The cotton industry chain is very long,connected with the farmers,cotton processing,cotton trade enterprises,textile industry,garment enterprises and consumers.Cotton price fluctuation affects the whole industry chain and related industries,Chinese government attaches great importance to the macro-control of cotton,but recent years,the cotton price frequently changes and the volatility increases seriously hurt the Chinese cotton industry,the main body of cotton industry chain bear the risk of fluctuations,suffered a great loss.The research and practice of risk management in our country has just started,and the policy is not perfect.In this paper,we will explore the cotton price forecasting,risk identification and measurement,hedging and management strategy,in order to get some helpful achievements for the industry or business,help the industry or enterprise in market volatility recognize the risk and opportunities,and control or even use risk,achieve the goal of stability and development,so it has important theoretical and practical significance.Aimimng at the price risk,this paper is based on the risk management theory,VaR theory,Copula theory and hedging theory,through normative analysis,quantitative analysis,empirical analysis,comparative analysis,process analysis and case study method,along the path of the price forecasting,risk identification and measurement,hedging and management strategy,In depth analysis of cotton price risk based on VaR.This paper is divided into 9 chapters,six parts.The first part is the introduction,including research background,significance,content,literature review;the second part is the theoretical basis;the third part mainly studies the factors affecting the cotton price and cotton price prediction model;the fourth part is the risk measurement of cotton spot(future)price,the price gap and portfolio of options and futures;the fifth part is the price risk hedging model selection,determine the optimal hedging ratio and execution price;the sixth part is mainly puts forward the risk management strategy of the international cotton trade enterprises and government support for it according to the research of this paper;finally is the summary and outlook.In this paper,we focus on the research on the risk of the international price of cotton and the use of options to carry out hedging.There are some innovations in the following aspects: To establish the international cotton spot(future)price forecasting model based on monthly data,and considering the factors affecting the international cotton price,made clear the main factors that affect international cotton price.And establish the risk measurement model of the international cotton spot(future)price based on ADL-GARCH;a GARCH-M model is established to measure the risk of price gap at home and abroad;a model for the use of Copula-GARCH to measure the risk of the international cotton option and spot portfolio is established.To break through Delta-Gamma hedging style of option,expand the ideas and methods of the international cotton option hedging spot(future).The binary GARCH and Copula-GARCH models are introduced into the international cotton option hedging,and the combination hedging model is established under the minimum VaR principle.A quantitative study on the choice of optimal execution price based on the Delta-Gamma-minimum Va R model.The main conclusions are as follows: First,the main factors affecting the international cotton spot price are global ending stocks,global consumption,CRB,international futures prices and China's import volume,spot price affected by the supply and demand,is relatively sensitive to the recent changes in the consumption factor,sensitive to long-term changes in the supply factor.The main factors that affect the international cotton futures price is the global cotton ending stocks,consumption and CRB,futures prices are greatly affected by demand and macro economy.Second,ADL-GARCH model can be used to carry out the price and VaR prediction,and price forecasting and risk measurement effects are better;international cotton spot(future)price risk is both high,and the risk of futures price is higher than the spot price risk;price gap between home and abroad has obvious income and risk high correlation,that is,the income is high when the risk of cotton import trade is high,the income is low when the risk of cotton import trade is low.The Copula-GARCH model,Delta-Gamma model to measure the international cotton spot and options portfolio risk has its advantages and disadvantages,according to the option in or out the money,the Copula-GARCH model and the Delta-gamma nonlinear method are used respectively;parameter method-dynamic frank Copula-GARCH model is the optimal Copula model to measure the international cotton option and spot portfolio risk,the tail correlation and the dynamic correlation between the return rate of international cotton option and the spot is very weak,and the hedging effect is not good.Third,the validity of the binary GARCH and Copula-GARCH model used for option hedging spot(future)price risk is verified,and were compared with the Delta hedging models,obtained the conclusion that use different hedging model under different risk conditions.International cotton futures and options have no tail dependence as well as spot,the establishment of options and futures hedging Copula-GARCH model should choose N-Copula.In the two dimensions of time and execution price,when option is moderate or deep out the money,hedging positions deviate significantly from or much higher than 1;when option is in the money or shallow out the money,hedging positions is relatively stable,the hedging positions changes in the vicinity of 1,changes above 1 under the Delta hedging model,changes around 1 under the binary GARCH-minimum VaR and the Copula-GARCH-minimum Va R;the volatility of hedging positions under Copula-GARCH model significantly greater than the other two models,hedging positions of GARCH model is relatively smaller.With the increase of the execution price,hedging positions increased;the more in the money the option is,the maller the hedging positions is,the more out the money the option is,the bigger the hedging positions is.The option contract expiration time has a certain impact on the hedging positions,will bring hedging positions to jump.Therefore,should focus on the option change in or out the money and contract expiration time in the dynamic adjustment of hedging ratio.The effect of call option and futures hedging is better than the option hedging spot,when formulating the hedging strategy,we should choose the option hedgin futures,even if it is to be carried out on the spot,also should be based on options hedging futures.Fourth,put forward the concept of the theoretical optimal execution price and the tradable optimal execution price,obtain the analytical method for solving the theoretical optimal execution price under Delta-gamma-minimum VaR model,found the time-varying and the chang law of the theoretical optimal execution price,clear theoretical optimal execution price after adjustment can use in international cotton options hedging spot(futures).According to the research of this paper,combined with the actual situation of the risk management of trading enterprises,the paper puts forward the strategies and suggestions to manage the risk of cotton price from two aspects of the enterprise and the government,and outlines the framework of the risk management of trading enterprises.The enterprise level include: increase awareness of risk management,strengthen the price risk management;establish early warning system,improve internal control mechanism;select different risk measure model under different positions,adopt different strategies under different risk;good select hedging models,hedging ratio and optimal execution price,manage cotton price risk to use various financial instruments.The government level include: make the international authoritative information release platform,build the price risk early warning system;improve the cotton target price policy,increase cotton production efficiency;improve the domestic cotton market system,enrich the risk control measures of enterprise;by giving full play to the advantages of the government and colleges,cultivate talents who are proficient in international cotton price risk management.Finally,use the results of this paper,referring to the framework of OLAM risk management,outline the risk management framework of trading enterprises.