China Aluminum Spot And Futures Optimal Hedging Effectiveness Of Empirical Research

A effective future market have the function of finding price and controling risk, the price of different future variety can reflect the supply and demand of cash market . it can reflect the future equilibrious cash price .With the development of future market in our country , hedge ratios are well used in establishing financial instruments of risk management, the investors can use future agreements to avoid risk for keeping their asset in value . Calculating optimal hedge ratios and analyzing their reliability is particularly important in the face of considerable basic risk. A considerable amount of research has focused on modeling the distribution of commodity cash and future prices and applying the results to estimate the optimal futures hedge ratio.. Many scholars has got different results that the complicated model doesn't always get the best answer. This paper use Naive Approach,OLS, Bivariate Vector Autoregressive Model, Bivariate Vector Error Correction Model, Bivariate BEKK-GARCH to estimate the optimal hedge ratio of aluminum cash and future prices. and to calculate risk valuation and maximum utility. In this way , we hope we can find out the best model the estimate the optimal hedge ratio.