Asset Allocation On Commodity Future Based On Risk Factor

Commodity futures investment has always been an important part of the investment.However,the CTA fund based on futures investment has always only accounted for a small part of the total amount of all funds in Chinese market.One of the most important reasons is that the types of futures investing strategies in the market are simple and the market urgently needs some strategies that can break the previous framework and can accommodate large amounts of funds.It can be believed that applying the structured risk model commonly used by hedge fund managers to China's futures market investment can provide a solution to the problem.Firstly,this article reviews the related literature in the three fields of modern asset allocation model,hedge fund risk model and commodity futures investment strategy,and summarizes some representative theoretical methods and main research directions.Then this paper introduces some of the classical models in modern portfolio theory,and focuses on the Structured Risk Model.For empirical research,this article selected a variety of futures with high liquidity and relatively longer trading history in the market.The core of the Structured Risk Model is the risk factors.This paper constructs four class factors based on the conditions of existing commodity in the Chinese market,namely non-ferrous metals,black commodity,chemical industry and agricultural and sideline products.Then using the theory of premium decomposing of commodity futures,this article constructed three style factors:momentum factor,cost factor,and turnover factor to build the model.Finally,through the reasonable estimation of the factor covariance matrix,the asset-specific return covariance matrix,and the factor return vector,this paper predicts the expected return vector and the expected covariance matrix of the asset and finds the optimal weight.The risk-factor-based configuration strategy was completed and historical backtest was conducted.This strategy has been able to obtain relatively stable profit over the past 12 years,and it has the advantages of a clear source of income as well as risk and a large amount of configurable funds.It provides a new solutions for commodity futures investment.