Analysis And Optimization Of Silver Derivatives Hedging Strategy

With the rapid development of the national economy,the development prospects of China’s financial derivatives market are becoming increasingly broad.The promulgation of the Futures and Derivatives Law of the People’s Republic of China further expands and deepens the breadth and depth of financial institutions’ services to the real economy.Enterprises actively respond to the call of the 20 th National Congress of the Communist Party of China and actively participate in financial derivatives trading.The increasingly frequent fluctuations in the commodity market have had an impact on non-ferrous enterprises.On the one hand,the vast majority of non-ferrous enterprises have a high degree of external dependence on raw materials,and fluctuations in commodity prices have affected both the procurement and sales ends of the enterprises;On the other hand,the non-ferrous metal industry has a large investment scale,low overall profit margin,and high risk of price fluctuations.Silver,as a precious metal in non-ferrous metals,has dual attributes of industry and finance,and its hedging nature is strong.Silver futures and options have a strong momentum in the derivatives market.As a precious metal processing enterprise,Enterprise A has established a hedging business team while conducting daily operations to actively manage enterprise risks through hedging.Based on the analysis of the hedging case of Enterprise A,on the one hand,I hope to provide some guidance and reference significance for relevant hedging schemes for small and medium-sized enterprises;On the other hand,I hope to open a new perspective for the hedging of small and medium-sized enterprises in the nonferrous metal industry chain,and better integrate theory and practice.The case analysis is divided into four stages: Firstly,starting from the basic situation,the basic situation of Silver Futures and Company A is introduced;Then,the basis for formulating hedging strategies for Company A was introduced,and the hedging objectives of Company A were obtained;Subsequently,based on the strategic basis and monitoring indicators,the approach of Company A to carry out hedging was explained,and the execution of the hedging plan was explained based on the hedging approach;Finally,based on the principles of objectivity,scientificity,and comprehensiveness,the paper conducts a profit and loss analysis,hedging effectiveness analysis,and capital occupancy analysis of the hedging scheme.The evaluation results show that both hedging schemes of Enterprise A are effective and both achieve the purpose of hedging.However,compared to finished products,the hedging scheme for raw materials does not achieve complete hedging,so the hedging scheme can be optimized and designed.Based on whether to change the original scheme,the optimization measures are mainly divided into two directions: first,make adjustments to existing schemes to improve hedging effectiveness;The second is to add additional measures for protection and optimization based on existing schemes.Specifically,in terms of adjusting the scheme,the ECM model is used to calculate the optimal hedging ratio of silver and optimize the hedging ratio in the scheme;In terms of adding additional measures,increase the protective strategy of silver options to prevent the risk of reverse price fluctuations.At the same time,it is proposed to carry out hedging through futures risk management subsidiaries and explain the feasibility and necessity of this measure.