Study Of The Hedging Of Shanghai Copper Futures Based On Dynamic Copula-TGARCH Model

The strategy of the optimal hedging has always been one of the most importanttopic of hedging in futures research field，and the effect of hedging strategy mainlydepends on the accuracy of hedging ratio estimation. According to the characteristicsand correlation of Shanghai copper spot and futures returns, this paper constructs adynamic Copula-TGARCH model to estimate the Shanghai copper minimum variancehedging ratio between spot and futures.Taking the Shanghai copper spot and futures as the research object. This paperusing TGARCH model to estimate the volatility of spot and futures returns ofShanghai copper according to some characteristics, such as rush fat-taileddistribution characteristics, time-varying, clustering and asymmetric effect ofvolatility, and then determine the specific marginal distribution. Normal-Copulamodel and DCC-Copula model are used to analysis the correlation characteristics,correlation factors as the basis, random shocks and asymmetric structure areintroduced. This paper obtained the joint distribution of Shanghai copper spot andfutures by constructing the TGARCH model with the three kinds of Copulas above,and then calculates the optimal hedging ratio. Finally, this paper compared thehedging performance based on three kinds of copulas model and OLS model.Research results indicate that the hedging strategy based on Copula-TGARCHmodel is significantly better than the static hedging strategy, and the Copula modelwith the basis, random shocks and asymmetric structure is better than the other threemodels on hedging effect.