Domestic Enterprises To Use On Futures Trading Control Risks

In recent years, traders of some domestic enterprises have repeatedly speculated a lot in foreign futures market when they were supposed to hedge the risk exposure of their firms, causing tremendous loss to state-owned assets. Based on the study of the effect of A corporation's hedging transactions, this thesis analyzes the function of hedging the price risk it faces, and aims to offer some guidance for domestic enterprises in hedging transactions.Firstly, the thesis analyzes the market state of copper and concludes cathode copper price will always fluctuate widely at a high level in the following years. Then it introduces the concept and functions of futures and analyses the effect of futures transactions on avoiding the risks of spot prices.According to the financial reports of different fiscal periods since 2003, with the methods of trend analysis and factor analysis, this thesis deeply analyzes the financial state of A Corporation. It is concluded that the increase of cathode copper price is the most significant factor which influences business profitability and that the wide fluctuation in cathode copper price brings great risks to the corporation as well. Therefore, it's necessary for the corporation to avoid the risks of cathode copper price by means of futures transactions.This thesis depicts the basic theories of hedging, and with the instance of A Corporation, analyses and compares the effects of traditional hedging and dynamic hedging ( based on past data), concluding that the two hedging methods can effectively avoid the risks of price fluctuation and that they show no significant difference during the period of the constant rise in copper price since 2003. On the other hand, hedging transactions cost the corporation opportunities of making great profit.Although A Corporation succeeds in avoiding the price risk by means of futures transactions, yet futures transactions themselves get into new risks. Therefore, the thesis gives a brief introduction to the risks a trader faces when it does futures transactions, the process of risk management and risk auditing.