Comparison Research Of Optimal Hedge Models On Metal Futures Market In China

As the financial markets continue to develop in the past thirty years, the metal futures market has been the most developed derivative market in china. But the principal parts'consciousnesses of risk are very week. The point of this paper is that we consider various mature models at home and abroad in Chinese metal futures markets,and find out some practical research conclusions.The use of futures contracts as a hedging instrument has been the focus of much research. At the theoretical level, an optimal hedge strategy is traditionally based on the expected-utility maximization paradigm. A simplification of this paradigm leads to the minimum-variance criterion. Although this paradigm is quite well accepted, alternative approaches have been sought. At the empirical level, research on futures hedging has benefited from the recent developments in the econometrics literature. Much research has been done on improving the estimation of the optimal hedge ratio. As more is known about the statistical properties of financial time series, more sophisticated estimation methods are proposed.This paper introduces several hedging models for calculating hedging ratio, and proposes an alternative specification of dynamic BGAECH model, then carries through empirical research on copper, aluminum, zinc and gold futures hedging problem. The results suggest that the basis effect is asymmetric, i.e., the negative basis has greater impact than the positive basis on the variance and covariance structure. Both in-sample and out-of-sample comparisons of portfolio variances reveal that the model with the asymmetric effect provides greater risk reduction than conventional models for copper, aluminum and zinc futures. However, the conventional OLS model has higher efficiency than the others. It is convenient for calculation too.