Cotton Futures Hedging And Its Applications In The Textile Industry

Cotton is the staple crops and important strategic materials in China's economic crops; it is directly related to the stability of China's cotton industry and its competitiveness in the international market. Our country is one of the big countries in the world both of great cotton production and cotton consumption, in recent years China's cotton industry has undertaken a rapid development period, cotton textile exports has become a pillar industry of our country and an important part of the national economy.One of the basic functions of futures market is hedging, hedging will be able to make use of futures contracts for risk management, reduce or transfer the risk of adverse price fluctuations. Over the past five years, China's cotton futures market has occupied the leading position in the cotton futures market in the world. Cotton futures market has provided for the textile industry the hedging way to achieve risk transfer. To understand the situations of the cotton futures market hedging function should be critical for the textile industry to avoid the risk of price volatility.The paper first outlines the development and the status quo of China's cotton futures market, then the relevant theory of the hedging function of futures markets have been outlined as well, and empirical analysis was done to analyze the actual situation of hedging function in cotton futures market by using Eviews software ; in the basis of empirical analysis, combined with the status quo of textile industry in the futures market the barriers of China's cotton futures hedging function is explored, then the targeted solutions were worked out targeted.