Research On Applications Of Tread Hedging Strategies To The Chinese Steel Trade Enterprises

Steel is an important basic material in the process of China’s industrialization, and steel output is also an important index to measure a country’s economic strength. Most of our steelmakers’steel products are mainly distributed by domestic steel traders, especially the low-end steel products. Under the background of economic globalization, the iron ore price’s sharp fluctuations in the international market leads to the price’s sharp fluctuations of domestic steel products. While our steel traders’ industry concentration level is low and the anti-risk ability is weak, our steel trading enterprises urgently need a tool to avoid the large price fluctuations in domestic market. As market economy develops, our futures varieties are constantly getting enriched and perfect, which have a great possibility to help our steel traders to take advantage of futures market to evade the price risk.This paper is based on the actual situation of Chinese steel trade enterprises and the author uses the method of case analysis to seek a suitable hedging model for the our steel trade enterprises. The paper first introduces the development of hedging theory at home and abroad and our research on hedging rate optimal model. Secondly, this paper expounds the development of our steel futures market as well as the actual situation of our steel trade enterprises to participate in the hedging, which directly illustrates the necessity and significance of our steel traders’participation into the futures market. Furthermore, this paper analysis the disadvantages of applications in the steel trade enterprises between traditional hedging strategies and basis hedging strategies, and the rebar futures contract features consistent with the trend of modern hedging strategies, this paper uses the futures trend technical analysis tool to set up a double line system hedging model based on the two moving average crossover method, analyzing the strength and weakness of the effect of different average crossover parameters’hedging. In the end, this paper demonstrates the strong correlation of the futures price and the spot price of deformed steel bar as well as the price discovery function of deformed steel bar’s futures price. What’s more, the author use a case of a steel trade enterprise to argument the effectiveness of double line system hedging model and find the basis plays a little impact on the hedging but cannot change the effectiveness of the double line system hedging model.