| China is currently the world’s largest pork production and consumption market,accounting for around 46% of overall pork consumption.Ensuring stable pig prices not only helps to ensure the profitability of farmers and the stability of the pig industry chain,but also helps to protect the basic livelihood of the people and meet the growing needs of the people for a better life.However,the price of live pigs in China is very volatile,which is not beneficial to the industry’s long-term development.At present,the traditional pig insurance such as breeding sow insurance and fattening pig insurance are mainly implemented in the market,and their insurance obligations are mostly for losses brought on by accidents,severe illnesses,epidemics,and other similar events.They only protect the basic breeding costs of pig farmers,and there is nothing to do about the risks caused by the drastic price fluctuations.In response to this situation,with the official listing of hog futures,various places have tried the hog "insurance + futures" model to protect the risk of hog price fluctuations,which mainly uses the risk hedging and price discovery functions of the futures market to protect the price risk of hog farmers while providing reinsurance channels for insurance companies to reduce the risk of insurance companies.Firstly,this thesis analyzes the pilot case of "insurance+futures" for hogs,refers to relevant literature,summarizes the pilot scheme’s flaws and suggests targeted solutions and suggestions to optimize the scheme,aiming to improve the efficiency of insurance,improve the existing "insurance+futures" scheme for hogs and stabilize the development of hog industry.The study found that the promotion and development of this hog futures price insurance faced many difficulties,and the pilot program itself had many problems,such as: unreasonable target price setting in the insurance contract,too short insurance period,unreasonable put option selection,large basis difference risk borne by farmers,only intermediary role played by insurance companies and the price discovery function has not been tested.Secondly,to verify the feasibility of the current hog "insurance + futures" model,this thesis conducts an empirical analysis on the effectiveness of the price discovery function of the hog futures market.The conclusion of the study shows that the hog futures market can help predict the spot market price and basically has the price discovery function,and the insurance scheme has the basis for implementation.The thesis then improves the operation mechanism and some terms of the model and determines the insurance rate of hog futures based on relevant data,mainly using Monte Carlo simulation with variance reduction technique to price half-Asian put options.The profit and loss analysis of the insurance is used to calculate the profitability of the hog farmers and the insurance company to prove the feasibility of the scheme.Finally,pertinent policy recommendations are made.First,strengthen the financial protection system,alleviate local financial stress,and accelerate the promotion of the pig futures insurance model.Second,accelerate the construction of pig futures option market and enhance appropriate systems,legislation,and regulations.Third,enhance the level of pig breeding scale and improve pig breeding infrastructure.Fourth,improve the system of guarantee system and formulate unified industry operation specification.Fifth,boost the "insurance + futures" model’s visibility and entice farmers to join the insurance. |
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