Research On The Basis Risk Of Commodity Futures Based On Var Model

One of the basic functions of futures markets is hedging, which provides a way to avoid the risks caused by the fluctuation of market price. In fact, hedging takes place of market price risk with less basis risk. Thus, basis risk management is very important during a hedging transaction.This paper analyzes the reasons of basis risk, and then, taking the data of copper in Shanghai futures exchange for example, this paper uses VaR method to build a model to measure the basis risk. Thirdly, this paper also tests the effectiveness of VaR method in measuring basis risk through out-sample forecast. Fourthly, Based on the measuring results of risk value, this paper illustrates to introduce the control of basis risk.Lastly, we also give some advises on basis risk management. Combining practice with theoretical models, this paper analyzes these actual data to measure the basis risk, and finally, to measure the hedging risk.