Research On Jet Fuel Hedging Model And Strategy

Of the eight costs of airlines,jet fuel cost is one of the key operating costs of airlines,and it accounts for a high proportion of operating costs.Fluctuations in jet fuel costs will directly affect the overall operating costs of airlines and indirectly affect company profits.The method for airlines to manage the risk of fluctuations in jet fuel prices is usually hedging.How to properly and appropriately use hedging tools is the top priority for airlines to avoid the risk of fluctuations in jet fuel prices.The most successful application of hedging is Southwest Airlines.Through rolling hedging strategy and gradual extension of hedging strategy,it successfully locked jet fuel costs to a certain range.The three major domestic airlines suffered a large loss of jet fuel hedging caused by the financial crisis in 2008,after digesting the existing hedging contracts,although they issued more standardized regulations for the management of oil hedging services,they have not yet adopted any hedging operation to manage the fluctuation risk of jet fuel price puts the company among the risks of jet fuel price fluctuation.Therefore,through the study of jet fuel hedging models and strategies,this article hopes to obtain jet fuel hedging strategies that have obvious hedging effects and low risks,and establish a theoretical basis for airlines to renew their oil hedging business.This article first sorts out the theoretical knowledge related to hedging,analyzes the research on hedging status in multiple industries,and summarizes the success or failure experiences of domestic and foreign airlines,and the current hedging status of airlines.Based on the above hedging theory and current situation,a VaR-based jet fuel hedging model is constructed.By adjusting the model parameter confidence level,the risk preferences of different investors can be expressed;for the model parameter estimation method,the CopulaGARCH model is used to estimate the parameters of the jet fuel hedging model.Heating oil futures that are highly correlated with jet fuel prices and crude oil options with active trading status are selected as empirical analysis data.Through unit root test and cointegration test,the data meet the conditions of the hedging model.The empirical results show that all three jet fuel hedging models can reduce the risk value of the asset portfolio and effectively reduce the impact of jet fuel price fluctuations.The effect of using only options for hedging is limited.The use of futures-options for hedging can minimize the VaR of jet fuel asset portfolio and effectively avoid the risk of jet fuel price fluctuations.Taken together,the strategy of hedging jet fuel through a variety of tools is very effective,and it is an important strategy for airlines to use hedging to manage jet fuel price risk.