Futures Hedging Model Based On The Smallest Negative Semi-variance

Futures market hedging,the key question is to determine the hedge ratio.Hedging model is not only concerned by the large number of hedgers but also one of the key issues of futures pricing theory.Through hedging model to determine a reasonable rate,it can increase the effect of hedging,and circumvent the spot price risks effectively.This paper is divided into five chapters.The first Chapter analysis the basis on choosing the topic,the current research progress and shortcomings,the research framework and main content of the study.The second chapter looks back the existing theories and models,as well as the research basis.The third chapter outlines the futures hedging on the principle based on the minimum negative semi-vario.ChapterⅣestablishes hedging model on the basis of minimum negative semi-vario. ChapterⅤof this paper,based on the minimum negative semi-vario,engage in an Empirical Study and comparative analysis of the model.Finally,some conclusions。The main thesis of the research results are as follows:To measure the hedging risk,we should use the negative semi-vario instead of variance.Variance with risk hedging measures will counte the fluctuations of the yield deviation from the expected rate of return as risk,In essence, only the part which the actual rate of return is less than expected rate of return is risk,the part which the actual rate of return is larger than expected rate of return is opportunity.Based on the different effects of negative semi-vario to the short and long position,hedge ratios of short and long position are not the same.The summary of the yields of the two positions is zero,so their negative semi-yield is complementary.Therefore the negative semi-vario is different and the hedge ratio we got is also different.For either short or long position,the hedging risk means the portfolio yield is less than the expected yield,which is called negative semi-vario.The objective of hedging is to take use of the opposite fluctuation direction between spot and future,so the loss resulted from the spot market can be offset by the return gained from the future market.As a result,the hedging objective should be the yield variance of portfolio which combined spot and future,rather than the variance of spot or future yield individually.