Analysis Of The Application Of Hedging Financial Instruments In Enterprises

In China,financial derivatives have been developed for many years.Since 1980 s,the People's Bank of China has been carrying out the functions of the central bank,and starting to set up financial markets.In 1990,based on spot,Grain Wholesale Market of Zhengzhou China introduced futures trading,which signals the birth of Chinese futures marketing.Meanwhile,the international trades are changing all the time.Then,various external shocks,such as the fluctuation of exchange rate,commodity price fluctuation,rate etc.,are coming.By using financial derivatives to hedging,enterprises can avoid the risk of various market fluctuations effectively.Enterprises can buy or sell the Futures contracts related to commodities from commodity futures market,to establish the profit and loss balance mechanism,and to avoid price risk.This paper studies the positive effects of using hedging to avoid the fluctuation of commodity price and rate,by real cases.And by hedging,it can reduce the profit fluctuation and improve the value of enterprise.Derivatives tools are also a double-edged sword.There are many speculators in the market.They use hedging tools as a speculative tool,aiming to earn high returns,which will increase business risk.This paper selects the failure cases to analyze.Through the analysis,the rational use of hedging tools can help enterprises to avoid market risk,enhance corporate value.On the other hand,increasing leverage for speculation will increase the exposure of enterprises,financial pressure,and cause irreparable losses.Enterprises should attach importance to the risk management of the use of financial derivatives.