A Case Study Of Hedging In White Sugar Industry

Since the reform and opening up, the continuous development of the financial market of ourcountry and deepening, more and more financial instruments has been the development and use of, themarket self-regulation has occupied more than2/3of economic development. Market economy is based onmarket allocation of resources as the foundation and the main means of regulation. Under the marketeconomy mechanism, commodity traders are price discovery and risk aversion of the problem. The uniquefunction of futures market plays an important role in the establishment of China’s socialist marketeconomic system.In order to promote the domestic financial derivatives transactions, and gradually improveChina’s derivatives market system, can better serve the real economy, improve the comprehensivecompetitiveness. Zhengzhou commodity exchange, China Financial Futures Exchange and reference to thesuccessful launch of sugar options, stock index options contracts and conduct a series of simulation testtransaction, aimed at promoting the development of Chinese option market, enhancing the controllability ofenterprise risk. Although our country open futures trading has many years of experience, but manyenterprises have not really aware of the huge role of futures, and did not take advantage of futures marketrisk aversion function. This paper describes the basic hedging transaction history, principle and hedgingprinciple, using two kinds of tools: Futures and options, detailed description. And carries on the analysisand application of hedging strategies for different sugar enterprises, make enterprises to enhance riskaversion based on to see the specific effect of consciousness. In order to improve the hedging function offutures market, which brought the enterprise to better spot price volatility and uncertainty, in order toenhance the core competitiveness of domestic enterprises for the purpose of.The traditional futures hedging is to use a number equal to, the direction in the futures and spotmarket on the contrary positions. The hedgers to loss or profit in a certain range. And the change of futuresprice and spot price can not keep the same direction and magnitude of change, so that the1:1hedge ratiocan not reach the expected goal. So, in this based on the analysis of the model, adding to collect market anddata to make out the hedging ratio of sugar futures contracts are. Based on the obtained results, with acertain enterprise as an example, make different hedging strategies, and specific data to do empirical effect of concrete. Based on the comparison of the hedging strategy effect, given the control solution of theassociated risks, to improve the enterprise using financial derivatives consciousness through the validationof this specific strategy.Through the white sugar futures, spot in the Wind database and sugar options test data of theZhengzhou Mercantile Exchange in2012between the two several well-known domestic Futures Companyanalysis, based on the comparison of OLS, VAR the main analysis method based on the OLS model, theuse of hedging strategies of different, differences between different hedging effectiveness analysis hedgingportfolio, analysis of the causes of different effects of hedging effectiveness.