A Comparative Study On Gold Hedging Method Of Company C

In recent years,the dramatic fluctuations of the international gold price have brought huge market risks to production and operation of relevant enterprises in China.These risks have become hidden dangers and their increasing prominence has greatly demands of these enterprises for hedging.Consequently,research into hedging theories,operations and selecting of hedging varieties has become a hotspot issue in the theoretical circle and the market.Objectively,this gives rise to demands of enterprises to avoid market risks through derivative trading hedging.Hedging is a trading behavior which transfers risks of price fluctuations by buying in or selling out contracts relevant to cash commodities or assets,similar in number and time,and opposite in direction on the futures market by commodity producers and operators.Currently,hedging tools available for domestic gold-related enterprises mainly refer to gold futures contracts on Shanghai Futures Exchange and AU(T+D)and COMEX gold futures on Shanghai Gold Exchange.Company C is one of largest-gold-consuming enterprises.During its operation,it often refers to hedging.Therefore,this paper chooses gold cash commodities of Shanghai Gold Exchange and relevant price data of three hedging tools,and compares them with the traditional hedging currently adopted by Company C through OLS and EC-GARCH Model to come up with the optimal hedging ratio and other indexes.The hedging validity indexes are used to evaluate hedging effects.Advantages and disadvantages of various hedging strategies are comprehensively compared and analyzed,and corresponding suggestions are offered to Company C as to its hedging practices.