The Futures Hedging Research Based On Copula Theory

With the development of the financial markets and financial innovation of the theory, hedging theory is also constantly deepening developing which provide our investors with a better hedging financial instruments. The hedging model the core content of the theory is the value calculation of the hedge ratio.Hedge ratio decides the preserve and increase the share of the futures on the spot to reach the purpose of evading the spot price risk.Paper is divided into five chapters. The first chapter is the introduction which analysis the research background, research based on domestic and foreign research status of hedging theory, research contents and methods of hedging steps as well as the paper’s innovative points. The second chapter discusses the theory of the futures market, financial risk management and hedging techniques. Chapter III study is based on time-varying conditional value at risk related to of Dynamic Copula single varieties futures hedging model construction. Chapter IV establishes hierarchical Copula and time-varying correlation "vine" structure (Pair-Copula) Dynamic Copula many varieties of futures hedging models. The fifth chapter and sixth chapter are the conclusion and Prospects. The main content of the paper are as follows.Firstly,the paper constructs time-varying Copula function dynamic futures hedging models of single species based on the conditional value at risk.The traditional static the single varieties futures hedging model largely does not meet the real financial market environment, this article through the establishment of a single product futures hedging model with time-varying Copula dynamic that overcome the static hedgingdefects in the traditional linear correlation coefficient to characterize the relationship between the variables transferred to the nonlinear relationship up to describe the relationship between the variables. The paper use of model financial risk based on the conditional value at risk measurement tool to overcome the deficiencies of traditional hedging model which does not have the risk appetite of investors factors into account, with a confidence level of mathematical tools to consider the investors’risk preferences, then get basedCopula function of time-varying conditional value at risk hedging model. In Conditional value at risk hedge model, first, using the Monte Carlo simulation method simulate the futures and spot yield time series to overcome the disadvantage of using historical data, and more in line with the profit and loss scenario; second, using nucleation density estimate the distribution method of the futures and spot yields to overcome the parameter estimation model people setting data according with a particular distribution form assumptions.Secondly, the paper establishes time-varying "Vine" structural dynamic futures hedging model.Establish a the many varieties futures hedging model overcome the problems with the corresponding futures commodity hedging in the spot market. In Futures Hedging in multi-species model build, first, the good vine "structure Copula model solve the complex nonlinear dependency structure between futures and futures as well as futures and spot, so much as futures hedging model modeling it; second, Time-varying Copula function is applied to the "vine" (Pair-Copula) dynamic dependencies between two two variables to describe the structure of multivariate been changed dynamic "vine" structure Copula model; Third, GARCH model theory deals with the time sequence of the futures and spot yields, easy to select the right edge of the distribution.Thirdly, The paper establish many varieties futures hedging model of the hierarchical the Copula Function thinking.The paper select layered Copula thought to depict the dependencies between two variables in the multivariate Copula model instead of the vine "structure to deal with the relationship between the multivariate. The layered Copula thought with layers of parsing, layered ideas of building a Copula function describe between two variables in the multivariate dependencies making the loss of information between the variables greatly reduced, thereby obtained multivariatenonlinear dependency structure of the relationship between the two variables. Between two two-variable nonlinear dependencies and then find many varieties based on hierarchical Copula function futures hedge ratio value. The hierarchical the Copula function of hedging modeling thinking is a new attempt.