Under Partial Risk Hedging Theory And Empirical

Hedging is a common enterprise risk management strategy, the efficiency of hedging largely depends on the selection of optimal hedge ratio. Through the use of reasonable hedging model to determine the optimal hedge ratio, can improve the effect of hedging, to avoid market risk. The common used method of hedging the value at risk and minimum variance in current. Minimum variance method to measure the risk does not accord with the view of investor. Under the environment of finance crisis, VaR method is also fully exposed the defects of the application. Down side risk hedging model based on the behavioral finance theory, consider the risk detest mentality of the investor, scale the downside risk lower the target income. Consider with other method, LPM is a better method theoretically.The paper analyses the LPM theory between the metal futures and spot market. The realization of min-LPM mainly uses C++ computer program language and Microsoft Visual C++ 6.0 software programming. The analytic results show that the mature futures have a more efficiency hedging result, and the immature futures species hedging is less effective. The lower target means a more efficiency hedging. Overall, LPM hedging is a effective method in hedging, and the use of flexible, suit with the view of investor.When investor have a plurality spot quantity, and the hedging ratio need to adjust periodic, the transaction costs on the impact of hedge ratio is a factor to be considered. The paper simulation analysis the transaction costs work on LPM hedging between different transaction costs. Simulation results indicate that the transaction costs have no evidence relationship with hedging ratio, but will reduce the effectiveness of hedging.