Research On The Optimal Hedging Model Of Futures Based On Cost Of Carry Theory

The key issue of futures markets is the determination of hedge ratio. The research of the hedge model is essential for the hedger and is a key issue of futures markets. Through hedge model to determine the hedge ratio can improve the hedge efficiency and effectively averse the risk of cash markets.There are five chapters in this paper. The first chapter is about the significant of the research, present research review, frame of the paper and main content. The second chapter is the present theory and model of futures hedging, and it also introduces the basic theory of the model of this paper. In the third chapter, we set up the principles of the hedging model of futures based on Cost of Carry Theory. In the fourth chapter, we build the optimal hedging model of futures based on Cost of Carry Theory. The fifth chapter is the empirical study and the comparison analysis the last chapter is the conclusion.The main works of the paper are shown as follows:(1)Building a new Cost of Carry theory model which is fit for the futures hedging researchFirstly, it considers the influence between spot price and futures price to set up the optimal hedging model of futures based on the cost of carry theory, so it can reflect the true situation when the futures price is confirmed. Secondly, it adds exchange expense and fluctuating item to the present Cost of Carry theory to fix the futures price which renews the present Cost of Carry theory, and it makes the futures price more reasonably.(2) Setting up the principles of the hedging model of futures based on Cost of Carry TheoryAccording to the MV theory of futures hedging, this paper builds up the optimal hedging model of futures markets based on Cost of Carry Theory by using Geometric Brownian motions to simulate the fluctuation process of spot price, bringing the simulated spot price parameter to the cost of carry theory model, doping out the futures price.(3) Simulating the coming track of futures price and the spot price by the method of Monte Carlo Simulation.The first innovation and characteristic of this paper is that it set up the hedging model which can reflect the influence spot price to the futures price. Secondly, it uses improved Cost of Carry Theory to open out the function relation between futures price and futures exchange expense and the fluctuant of the cost of carry. The Third innovation and characteristic of this paper is that it does empirical contrast test by using R_h/σ_h and hedging efficiency at the same time. And the empirical result shows that the model of this paper both has better R_h/σ_h and hedging efficiency than other traditional hedging models.