Research On Optimal Hedging Strategy Of Crude Oil Futures Market Under Different Frameworks

Crude oil is quite important and is known as "black gold" and "the lifeblood of the economy." Large fluctuations in oil prices can cause a major impact on the real economy and financial markets of the entire world.This paper focuses on the hedging of the international crude oil market.Based on the hedging theory,our main research is divided into two parts.Since the basis is one of the most important factors affecting hedging,the first part of this paper is the research of risk of hedging: the basis of crude oil market,including modeling and forecasting the basis volatility.The univariate models and multivariate models(including GARCH(1,1),GJR,CCC-GARCH,DCC-GARCH,and three types of BEKK-GARCH)are used to predict the volatility of the crude oil basis.In addition,in order to investigate the forecasting performance from the perspective of economics,this paper also considers the asset allocation,we construct a portfolio consisting of basis and risk-free treasury bills.The second part of this paper investigate the hedging performance of crude oil market under different hedging frameworks.We calculate the optimal hedge ratio of some commonly used models under the minimum variance and minimum risk frameworks,including OLS,VAR,VEC and CCC,DCC,three types of BEKK-GARCH models and two types of copula methods.The out-of-sample results of the minimum variance framework and the minimum risk framework are inconsistent,and there is no single model that always performs optimally under both frameworks.This paper further analyzes the performance of the model combinations,and the results show that the hedging strategy combined with all static and dynamic models has the most robust performance.