Case Study Of OTC Option Contract Design And Risk Hedging

Since the 21st century,the OTC option business has developed rapidly in the international market.The OTC option products have blossomed in the financial market,and the OTC option transaction amount has remained above $500 million all the year round(according to the statistics of the Bank for International Settlements).OTC option has already become an indispensable part of the international financial market.In the domestic market,with the sustained and high-speed growth of China's economy,the continuous reform and innovation of the financial market,and the continuous development and perfection of the capital market,China's OTC options business has sprung up vigorously.However,China's OTC option business started late,and there is still a lack of clear understanding and deep understanding of contract design and risk hedging.Therefore,from the perspective of financial institutions,that is,the designer of OTC options contracts and the implementer of risk hedging,this thesis will discuss how financial institutions should design personalized OTC options in different scenarios and how to hedge the risks brought by the OTC options through case studies,so as to provide a reference for financial institutions in the development of OTC options business.This thesis is based on the idea of"putting forward problems-literature review-Case Analysis-Case Revelation".In the part of the problem,this thesis finds that although there is a large demand for OTC options in China's economic entities,financial institutions still lack a clear understanding of OTC contract design and risk hedging management.In the part of literature review,the shortcomings and shortcomings of domestic and foreign scholars are found by consulting domestic and foreign references,and the research direction and methods are determined.In the case analysis part,this thesis firstly selected the classic case of OTC options to assist agriculture,countryside and farmers in recent years-the pilot case of ABC soybean OTC options of futures company,and then analyzed the OTC options contract design under different scenarios in detail.Secondly,the case is taken as an empirical r-esearch object to explore the results of fixed-time hedging and fixed-interval hedging under different parameters.The results show that:firstly,the hedging effect of fixed interval is more significant than that of fixed interval;secondly,increasing the hedging frequency(shortening the fixed-time hedging interval and reducing the tolerable interval)will be beneficial to risk hedging when the underlying assets fluctuate greatly;thirdly,when the hedging frequency is small and the proportion of hedging fees is low,the hedging deviation will be the hedging result.It plays a decisive role.Then,this thesis takes two scenarios as rerpresentatives to explore contract design and risk hedging rules under different scenarios.Finally,based on the above research,this thesis puts forward some suggestions on the design of OTC options contracts and risk hedging for financial institutions in terms of customer demand,contract price and risk hedging.