China's Metal Futures And Spot Correlation

Metal futures are commodity futures as a general way of a cash settlement. At present, in the international futures market traded non-ferrous metals, mainly have ten kinds, copper, aluminum, lead, zinc, tin, nickel, palladium, platinum, gold and silver. The world's non-ferrous metals futures trading mainly in the London Metal Exchange, the New York Mercantile Exchange and Tokyo Commodity Exchange. In particular, the London Metal Exchange futures contracts traded around the world recognized as the standard pricing of non-ferrous metal trading. China's Shanghai Futures Exchange copper futures trading in recent years, growing rapidly. Currently copper single species of cina turnover the New York Mercantile Exchange, has been the world's second place ranking.Brewing, and the outbreak of the financial crisis of 2007 and 2008, the world's futures and derivatives trading volume than those in the past years increased significantly. Among them, the Chicago Mercantile Exchange in 2008 the turnover of commodities futures contracts than in previous years the average trading volume increased by 22%, as of December 2008, the total volume of China futures market has been close to two times of 2007. From March of 2007 began by the U.S. subprime mortgage loans caused by the international financial crisis, the global economy has been hit hard, in the context of economic globalization, financial markets are increasingly showing synergistic change in trend. Enterprises in the global economic recession is the biggest risk currently facing, how to survive in the recession? It is only through the futures market to avoid risks, companies can ride out the economic crisis. In fact, the futures has become a tool for corporate crisis management, in a sense that the futures market is no longer just for corporate hedging, but rather for the enterprise "life."Since the 1990s, China's consumption of copper and aluminum to enter a period of rapid development, which is China's economic construction and reform and opening up a great relationship. China's rapid economic development and large-scale infrastructure construction is to promote the rapid growth in consumption, the main reason for copper and aluminum. While the developed countries transfer manufacturing to China and other developing countries, the strategy is also in the future of China's copper and aluminum consumption, an important factor for further growth. Copper consumption in China is a big country in the future, as the economic development of China, resource requirements for copper and aluminum will be further enhanced. Pairs of copper and aluminum futures and spot the study on China's future economic development has a certain guiding function.This object of study in this paper, is from the Shanghai Futures Exchange and Shanghai copper and aluminum futures in copper and aluminum wire mesh mean, we know that if the volatility of financial markets, changes in inspection must pay attention to it when they feature, therefore, generally need to adopt GARCH class model to describe changes in yield of when they gather, non-symmetry and other features, but the individual GARCH class model can capture the characteristics of the various terms of rate of return, the loss rate of return between a number of valid information contained in, in order to can effectively describe the various relationships between the financial markets, we need to univariate GARCH model extended to multivariate GARCH model, this paper is the use of DCC_MVGARCH model of Shanghai Futures Exchange Shanghai Nonferrous Metals net of copper and aluminum and copper and aluminum to the mean the mean rate of return of the relevance and the volatility of returns related to research, to characterize the metals futures and spot prices with each other to guide the relationship between the existence and the existence of volatility spillover effects. First, each asset is estimated that a single-variable GARCH process, then use the previous estimate of the standardized residuals of the estimated correlation coefficient of dynamic conditions. Finally, we could get a different correlation between the metals market test. This will contribute to our copper and aluminum efficient allocation of resources, improve the operational efficiency of China's futures market.