Garlic Futures Product Design Based On ARMA-GARCH Model

With the rapid development of China’s economy and the maturity of the capital market,China’s futures market is ushering in a new era of development.At present,although the Chinese futures market has a series of excellent trading varieties,such as iron ore,coke,soybean oil,etc.,there are still many limitations.First of all,the price fluctuations of existing futures varieties are greatly influenced by the prices in the international market.And we lack independent pricing power,which also which also limits its greater value.In addition,the current futures varieties cover relatively narrow fields and do not fully cover the markets demanded by investors,such as consumer goods.At the same time,existing varieties have the relatively large trading volume and price fluctuation.These elements limit the participation of some small and medium-sized investors.To meet these needs,China’s futures market needs to develop futures varieties that are more in line with actual demand and more sensitive to market conditions.In order to meet the needs of more investors participating in the futures market,futures companies need to do a good job of Issuing new futures products that are fit to investors’ needs.China is the largest producer and consumer of garlic in the world and occupies an important position in the world market.The launch of garlic futures will provide a better risk management tool for the garlic industry,ensure the steady development of the garlic industry,and will also help promote the construction of a modernized industrial chain for garlic.The development of market of garlic futures is importantly practical significance and developing value.Based on the current situation and development of China’s garlic industry,this paper studies the design of garlic futures.First,the development history,current situation and market demand of garlic industry are generally sorted out.Then,the product design of garlic futures is discussed in depth.In response to the needs of the garlic futures market,this paper proposes a scheme of futures contract,which is based on the characteristics of garlic.In the design of futures contract,this paper proposes a specific design for garlic futures contracts,including contract specification,trading time,minimum change unit,minimum change value,method of delivery.Then,Based on the theory of futures pricing,regression analysis of time series and statistical analysis are used to analyze the historical price data of garlic.In order to construct the pricing model of garlic futures.the ARMA model is used to model and forecast the price of garlic futures.The specific pricing formula of garlic futures is derived by doing regression analysis with ARMA,according to the expected futures price theory.Meanwhile,by analyzing the data,it is found that there is a high volatility and asymmetry of price fluctuations in this market,and there is a strong autocorrelation and heteroskedasticity.Therefore,the GARCH model was introduced,and volatility clustering analysis was added.Two models were fused to form the ARMA-GARCH model.Lastly the futures prices were calculated using Monte Carlo simulation for each of methods(ARMA and ARMA-GARCH).So far,we complete design scheme of the garlic futures.Finally,to ensure the healthy development of garlic futures and stable trading,suggestions are also made for the development and promotion of garlic futures market.Through the research and analysis of the garlic industry and spot market,the futures operation mechanism and market influencing factors are sorted out and summarized by combining the market economics theory.The research has important guiding significance for the development of garlic futures market,and also provides some references for the design of garlic futures products in future.In this paper,the model of futures pricing established by econometrics method can help investors and policy makers to better understand the futures market and the causes of price fluctuations.The design proposal of garlic futures contract will provide a clearer price reference,a simpler way to trade futures,and a better risk management tool for garlic futures trading.This paper establishes a reliable garlic futures pricing model to provide a favorable tool for market analysis and decision making.At the same time,it also analyzes the garlic futures market on the theoretical and practical aspects.It provide reference for related research and help promote the healthy development of the garlic futures market.