Research On Rare Earth Spot And Metal Futures Arbitrage Opportunity Discovery And Identification Process System Construction

In recent years,the price of rare earth products has continued to fluctuate due to rare earth related policies,trade frictions and extreme events,while the surge in demand for new energy caused by the "double carbon" policy has made the price of rare earth products continue to rise.In the price fluctuations,for the upstream and downstream enterprises in the industry risk management considerations,how to find profit opportunities in the fluctuations,how to avoid the risks brought about by price fluctuations,which is of great significance to rare earth enterprise managers,market participants.From the perspective of rare earth product price fluctuations,first of all,compared with many metal futures,rare earth product prices and some metal futures prices show synchronous fluctuations,and furthermore,if there is a relevant linkage between rare earth spot and metal futures prices,then the two may have statistical arbitrage conditions,using this condition,it is possible to design a strategy to meet the upstream and downstream rare earth enterprises and market participants for risk management Second,rare earth products are currently only available in spot form.Secondly,there is only a spot market for rare earth products,which makes it difficult to manage the risk of price fluctuations directly through hedging,but relying on "cross-period and cross-product" to find the "most correlated" metal futures as a risk management tool.However,it is an effective way to find the "most correlated" metal futures as a risk management tool by relying on "cross-period and cross-product",which is an accepted idea in the field of financial engineering.Therefore,based on the price linkage between rare earth spot and metal futures,we can find arbitrage opportunities in the price fluctuation of both of them,which is an enrichment of the existing arbitrage varieties and also provides new ideas for cross-period and cross-product arbitrage for rare earth products based on the goal of risk management.The research of this thesis will provide theoretical basis for the risk management of rare earth enterprises.In reality,from the perspective of rare earth enterprises,rare earth investment and risk management needs,there is a strong need for "cross-period-current,cross-species" hedging and arbitrage with rare earths as the spot in the rare earth-related enterprises in B city,where rare earths are the key industry.This thesis can provide new arbitrage strategy ideas and methods for market participants.The research is based on the "cross-period and cross-product arbitrage financial engineering investment project" set up by a rare earth investment company in B city based on business expansion and risk prevention.Based on the investment products involved in the company’s actual business,the daily trading prices of 16 rare earth spot varieties listed on the Baotou Rare Earth Exchange and 5 metal futures varieties listed on the Shanghai Futures Exchange from 2017 to 2021 are selected as alternative varieties for the study of cross-species arbitrage opportunities between rare earth spot and metal futures.Firstly,this thesis uses computer Python language to analyze the correlation of the selected time series,and by drawing heat map and calculating Pearson coefficient statistic analysis,we find that the praseodymium oxide in the rare earth spot variety and the metal aluminum in the metal futures variety have strong correlation.Then,the screened time series were subjected to ADF smoothness test and OLS cointegration test,and it was concluded that the time series of the selected paired varieties were smooth series.Then,the cointegration model and GARCH model are constructed to backtest the effect of the screened time series and analyze the model evaluation.Finally,the identification process system is constructed for rare earth spot cross-species futures,and the monitoring system of trading risk,abnormal mutation discrimination and risk control discrimination is constructed in the simulated trading process.The final results show that the GARCH model and the co-integration model can generate arbitrage in the price fluctuation between the rare earth spot variety of praseodymium oxide and the metal futures of aluminum,and the return is greater than 0.The highest return in the GARCH model is about 1.1%,and the highest return in the co-integration model is about 1.7%,and the co-integration model and the GARCH model show good returns in the time series.This may allow hedgers and arbitrage speculators to achieve an optimistic situation of low risk and high return in rare earth spot cross-species futures arbitrage in the future.Based on the above research,the identification system for cross-product arbitrage trading between rare earth spot and metal futures is further constructed according to the needs of this thesis dependent project.The system is constructed to provide process guidance for the actual business to be carried out subsequently and to provide the basis for the formal launch of the operation platform system.