Actual Reserch For Optimal Hedge Ratio Of Iron Ore Swap

The article introduces the iron and steel industry as the background atbeginning. All enterprises are dealing with the difficulties like low profit,high cost, huge stock etc. How to avoid stock risk caused by pricevolatility has been one of most important issue. This article puts forwardan opinion to use iron ore swap trading as hedge measure, and proveswhich is rational to substitute the future market.Based on above, and benefiting from some other researchers’ studieson hedge theory and practice, this article uses VaR model and OLS modelto research the optimal hedge ratio on the data of spot price and swap pricefrom2010to2011. By setting the different confidence interval, the VaRmodel supplies a speculator option to the enterprises.The research shows that compared with non hedge, the VaR and OLSmodel can help enterprises avoid price volatility significantly.