The Research On Futures Hedging Optimal Model And Its Application

Futures is one of the most important tools of hedging spots' price risk, and futures hedging is the basis of futures market. However, the effect of hedging depends on the optimal hedging stratigies. This paper brings forward the theories of VaR single-period optimal hedging and multi-period optimal hedging based on dynamic programming. The VaR single-period optimal futures hedging model and multi-period optimal futures hedging based on dynamic programming model are set up. This paper provides a series of futures hedging theories and strategies VaR single-period optimal hedging and multi-period optimal hedging based on dynamic programming, and exploits a new area on futures hedging optimal decision which is important to spots' producer and so forth.The contributions and characteristics of the paper are: (1) Based on the denial that the traditional hedging theory supposes that spot and futures' price fluctuation perfect positive correlation, this paper deduces the VaR optimal hedge ratio converging to the Minimum Variance (MV) optimal hedge ratio under the circumstance of the futures zero-expected return, perfect correlation and the100%-predetermined confidence level. Furthermore, the VaR hedge ratio is equal to traditional hedge ratio under the hypothesis of the same direction and magnitude of spot and futures' price fluctuation and perfect positive correlation. In fact, the MV hedge ratio and traditional hedge ratio are the VaR hedge ratio's special cases. (2) The VaR optimal hedge ratio is composed of two parts, which are the part of reflecting the speculating demand of hedger and the part of pure hedging, and therefore, it could further discuss the meaning of hedge ratio. (3) Using VaR well and truly ascertain the maximum loss of hedging portfolio, and centrally reflect the hedger's capability of enduring risk. With the VaR controlling the risk quota, the VaR hedge ratio is derived, which colligate the hedger's expected return and risk aversion. This solves the problem that the existing research ignores the return and risk aversion or the parameter of risk aversion is difficult to determine hedge ratios. It is effective to avoid the mint loss of hedging. (4) The dynamic multi-period futures hedging optimal strategies are derived. Using the dynamic programming method, the impacts of Futures margin's opportunity loss and trade cost are taken into account. This solves the problem of the existing hedging strategies ignoring the impacts of margin and trade cost, and improves the model's precision and accuracy. (5) The principle of the maximum return and fixing cost of the hedger is considered. The malpractice that would only consider the price risk and ignore the futures and spots portfolio's profit is solved. (6) With practical examples contrast analysis, this paper validate the VaR optimalhedge ratio and multi-period dynamic optimal hedging strategies from the viewpoint of futures amount, margin and returnMoss. It is proved that VaR optimal hedge ratio and multi-period dynamic optimal hedging strategies are more accurate than the existing methods, such as MV hedge ratio and traditional hedge ratio.