Study On The Dynamic Hedging Models And Hedging Strategies Of Oil Futures Based On BGARCH

Along with the sustained and rapid development of economy, demand for oilhas increased sharply. Limited by resources reserves, domestic oil supply can’tsignificantly increase; it has promoted import dependence of Chinese oil, which hasremained at50%. Facing high record of the international oil prices, China can onlybe forced to "passive accept”. In addition, Due to the continued appreciation andstrong volatility characteristic of the RMB exchange rate in recent years, facing theincrease risk of foreign exchange, the company needs to seek an effective hedgingmethod to avoid foreign exchange risk eagerly. Then, how to use the financialderivatives hedged to avoid oil price risk and fight for oil price have caused oilcompanies’ great concern. According to the theory of hedging, this article isengaged in theory and empirical research on the oil price risk managementdecision-making model.Oil prices have characteristics of Heteroscedasticity due to the financializationdevelopment. In order to fit the oil prices characteristics of heteroscedasticity,thisarticle firstly introduced the theory of GARCH model which is good at portrayingthe characteristics of time series heteroscedasticity,based on the traditionalminimum variance of hedging model, and then established the single factordynamic hedging model of oil futures based on BGARCH,used four indexes, whichare yield average, yield variance, mean variance ratio of yield and hedgingeffectiveness, to compare hedging effectiveness with the static hedging model of oilfutures based on VaR and traditional static hedging model. The results show thathedging effectiveness of the dynamic hedging model of oil futures based onBGARCH is the best among three models.Secondly,in order to use time seriesmodeling technology to verify the existence of cointegration between oil spot andfutures markets, and consider the impact of hedging led by exchange rate factors,this article improves the single factor dynamic hedging model of oil futures basedon BGARCH,and constructs the double factors dynamic model of oil futures basedon ECM-BGARCH through merge ECM into GARCH models. The results showthat hedging effectiveness of the double factors dynamic hedging model of oilfutures based on ECM-BGARCH is better than that of the double factors dynamic hedging model of oil futures based on BGARCH.In addition, compared with singlefactor, the model of double factors is better at avoiding risk. Finally, this articleinvolves the fees of hedge into research perspective, conducts the research ofhedging strategies of oil futures based on the hedge fees. These results not onlyenrich research methods on hedging theory of oil futures, but also have highsignificance on improving China’s oil companies participate in the international anddomestic futures market.