The Research Of Cross Commodity Arbitraging And The Empirical Tests In The Futures Market

Arbitrage is a kind of hedging strategy in portfolio investing, as a mean approach to evade future trading risk, it's been world-wildly used by all kinds of invest funding and other financial institution. Cross commodity arbitraging is one of the arbitrages. There are several commodities which can take the place of another or effected by a same demand-supply factor and the movement of these commodity contracts' price in the futures market is toward same direction or oppositional way. Cross commodity arbitraging can make profit by catching the trading opportunity. As a kind of arbitrage, cross commodity arbitraging is very important as to the price discovery, market activity and risk management. Research and development of arbitrage is essential to the development andstability of futures market.At first, the paper introduced the concept of arbitraging, the features and function of future arbitraging, the basic classification and mechanism of cross commodity arbitraging. In chapter three, the technique analysis for cross commodity arbitraging was discussed, and two arbitraging model were established: cross commodity arbitraging and the same industry cross commodity arbitraging. After these, the range of the price difference in soybean industry was defined according historical data. By using the latest date of the Dalian commodity exchange, the model empirical tests were made in the chapter four. Finally, more discussions were given based on the results of test. The conclusion: 1. The futures market has the function of price discovery, whether cross commodity arbitraging or the same industry cross commodity arbitraging, there are chances for arbitrage; 2. Because the complex relations between the commodities, the results which based on historical date may become ineffective; 3. There should be risk control in the process of arbitrage.