China Metal Futures Basis Problem Research

With the growth of international trade and the production of internationalization,the enterprises’risk expectation of production cost will also increase, so how to avoidprice risk has becoming an important link in production. Futures are becoming animportant financial derivative in transferring price risk for companies. However, it iscommon to those hedging companies that make losses in the futures markets. Themain reason for this phenomenon is the lack of understanding of basis risk, as basisrisk is the key factor in hedging process. Comparing with the foreign market, thedomestic future market is also immature with a larger basis risk, so how to selecttrading point which is relatively rational is a virtual process. To choose one reasonablepoint, we should analyze the mental basis fluctuation. It is significance to study thefactors that influent the basis risk of domestic and the fluctuation.The paper chooses shanghai consecutive and successive three of copper、aluminum and zinc contract as analysis objects. By simple linear regression、ARMAmodel ,the aim of the paper is to find out the major external factors which impact themetal basis and the best lags .Furthermore, it finds out varieties of optimal models tofit different metals and applies to those models for predictive analysis.The conclusions of the paper are: Chinese metal basis of futures is larger thanforeign. Different metal basis of futures has different internal and external factors andeach kind of mental futures basis has its own optional model. Though the successivethree of mental contracts have a bigger infliction than successive ones, the formerones have much more regulation. In addition, the mental futures contracts which listedearlier are more regularity. At last, the results also show that the price range plays animportant role in all basis of the mental futures.The innovation of this paper is the variables. Selecting variables is not limitedmacro and micro factors and their own factors which lag owns, the paper will alsochoose the effective variables together and then constructs scientific model. In thispaper, the effective variations selection is accomplished by simple linear regressionanalysis and ARMA model. The final model is the optimal model without linear .Basishas lots of effect factors, such as macroscopic and microscopic factors and integrationtwo factors. Then how to select the variables and deal with those factors has becomethe key in analyzing. In former papers, they found that the qualitative analysis toexplain the relationship between dependent variables and independent variables isfeasible in theory, but is difficult in practice. So this article are mainly analyzed fromthe quantitative perspective. The paper hopes to provide an operation reference for domestic metal futurehedgers、arbitrageurs and speculators through this paper, and give an entry point forscholars for further studying of domestic metal future basis.