A Study On Optimal Hedging Ratio Of Portfolio Under The R-Vine Pair Copula Model

At present,China's security market is not yet mature and risk hedging tools are limited.Therefore,the use of one futures hedging on multiple spot is an important strategy in portfolio risk managementoFor the study of modern hedging theory,Ederington first proposed using least-squares regression(OLS)to calculate the optimal hedging ratio,using the variance of return on assets to describe the risk,Since the variance contains part of the fluctuation of the random variable in the mean,it deviates from the hedging requirements.Later.the scholars proposed to use the B-VAR model to calculate the optimal hedging ratio and use VaR as the risk measurement index.After scholars' improvement,CVaR,as a measure of consistency of risk of excess loss in extreme cases,can be gradually applied to the hedging model.Compared with variance and VaR,CVaR in the measurement of extreme cases of loss Risk has obvious advantages.The mean-CVaR model is widely used in portfolio theory.In this paper,the mean-CVaR model is introduced into the hedging problem.Monte Carlo simLulation of CVaR is a more reasonable method,and the use of copula function can better describe the correlation between variables,and can be used to build a joint distribution.Therefore,our main idea is to combine copula and Monte Carlo simulation methods,copula f'unction to describe the relationship between variables and the construction of joint distribution,Monte Carlo simulation to get the scenario data of each asset,and we input the results into Mean-CVaR hedging model,you can get the optimal hedging ratio.Based on the above ideas,this paper first briefly introduces the hedging theory and CVaR,explains the superiority of CVaR to describe risk,introduces CVaR and futures assets based on the mean-variance model,and constructs an optimal hedging model based on mean-CVaR.We introduce Copula and R-Vine Pair copula,which describes the high-dimensional correlation,describe the edge distribution of random variables by GARCH model,construct the R-Vine Pair copula model to describe the correlation between multivariate variables.In this paper,we use the Monte Carlo simulation to generate scenarios and probabilities of returns on assets,and bring the scenarios and probabilities of return on assets into the mean-CVR hedging model to get the optimal hedging ratio of the portfolio.Empirical researches based on CSI 300 stock index futures and five component stocks of CSI 300 stock index have proved that portfolios hedged by using the proposed model in this paper achieve better performance in both return and risk control when compared with improved hedging model under normal distribution assumption.