Research Of The Hedging Of INE Crude Oil Futures

Crude oil price directly affects the profit space of upstream and downstream enterprises in crude oil supply chain.However,the current global economic environment is in the downward period,and the instability of the international financial market is increasing.Persistent price fluctuations are transmitted from the macro level to the international crude oil spot market.In addition to the sudden international events from the short-term impact on international oil prices,international oil prices on the basis of continued volatility will appear in a short period of huge fluctuations.The financial derivatives commonly used in hedging are futures or options contracts.On March 26,2018,Shanghai International Energy Trading Center(INE)officially launched the first real oil futures contract in China.On June11,2021,Shanghai International Energy Trading Center officially released China ’ s first crude oil option contract.Considering that China ’ s options contracts have a short-listing time and less trading volume,this paper chooses INE crude oil futures with more trading volume for hedging research,and hopes to provide suggestions for the development of China ’ s crude oil futures market and enterprises to improve hedging efficiencyThis paper takes Daqing crude oil spot and INE crude oil futures as the research objects.Considering the possible non-linear correlation and state transition characteristics in the crude oil spot and futures market,this paper constructs the Markov state transition Copula(MRS-Copula)model to describe it and calculate the hedging ratio.Among them,for Copula function,this paper selects Clayton Copula function that can accurately capture the lower tail change and Gumbel Copula function that can accurately capture the upper tail change.In order to test the validity of MRS-Copula model,this paper takes the following three measures: First,choose variance reduction and unit risk return as the evaluation criteria of hedging efficiency;secondly,MRS-OLS,MRS-VAR,MRS-VEC and MRS-DCC models were constructed and compared horizontally.Third,the data is divided into within-sample and outside-sample comparison,the hedging ratio outside the sample is predicted by the rolling window.Finally,this paper also uses the empirical results to study the simulation application,and further tests the effectiveness of Markov state transition Copula model in hedging.The empirical results show that the crude oil futures and spot sequence has the characteristics of high volatility and low volatility.the upper-tail correlation when the futures and spot prices surge is stronger than the lower-tail dependence structure when the futures and spot prices plunge;the correlation between futures and spot in high volatility is stronger than that in low volatility;the MRS-Copula model with the state transition characteristics has achieved the highest hedging efficiency both within and outside the sample,in which the Gumbel Copula function performs better in terms of variance reduction,while the Clayton Copula function performs better in terms of unit risk return.