The Research On The Futures Hedging Model Based On Conditional Value At Risk

Future hedging is to buy or sale the futures contracts with equal amounts and reverse trade directions of the spot market,so as to compensate the real price risks caused by price changes in the spot market by sale or buy the futures contracts at a certain time in the future. The key issue of futures hedging is to determine the hedge ratio.The research of the hedge model is not only an essential consideration of the hedger,but also a key issue of the futures markets.Determining the hedge ratio through the hedging model can improve the effectiveness of future hedging,and reduce the risk of spot markets.There are five chapters in this paper.The first chapter is about the issue selection gist, relative research review,research content,research approach and technical route.The second chapter is the research on the optimal model of the single hedging based on the conditional value at risk.The third chapter is the research on the estimation model of futures hedging based on Copula method.The fourth chapter is the research on the multi-futures hedging decision model based on controlling conditional value at risk of hedged portfolio.The fifth chapter is the conclusion and outlook.The main work of the paper is shown as follows.(1) Single futures hedge ratio model based on conditional value at risk is built.By risk measure method conditional value at risk,risk of futures hedgeing is controlled. A decision-making model of single futures hedging is set up with the minimum the conditional value at risk.Through the theory proof,minimum variance hedge ratio,traditional hedge ratio,VaR hedge ratio is only examples of this model.Using conditional value at risk of futures hedged portfolio return as optimal function,considering tail loss of hedged portfolio and synthesizing the hedgers' expectation return and risk aversion,applying the confidence level to reflect the risk aversion of hedger.The model changes the phenomenon that existing research ignored hedgers' expectation return and arbitrarily made risk aversion parameter. The model made the selected futures reflecting risk tolerance ability of hedgers.The dissertation also present that single futures hedge ratio based on conditional value at risk of this model is composed of reflecting the speculating component and pure hedging and shows deeper meaning of hedge ratio.(2) The futures hedge ratio estimating model based on Copula method is built.Adopting the Copula function by statistic test to get the joint probability distribution function between spot and futures return,employing the Kendall correlation coefficient to measure the nonlinear correlation of spot and futures return,through using the Monte Carlo simulation method to simulate the future return scene of spot and futures,the futures hedge ratio estimating model based on Copula method is built.Through using the Copula function to get the joint probability distribution function between spot and futures return,the practical change of hedged portfolio return is reflected.It is avoid that in the existing study the special assumption of return distribution does not reflect the practical return situation.Using the tested optimal Copula function to descript the joint distribution of the hedged portfolio,the nonlinear correlation structure between spot and futures risk is reflected.The defects of traditional linear correlation coefficient are overcome.(3) The multi-futures hedging decision model based on conditional value at risk is built.While the multi-futures hedging,extreme loss of futures hedge would happen.Using the conditional value at risk of multi-futures hedged portfolio to calculate the tail area of hedged portfolio,and measuring the extreme risk of hedging,adopting Monte Carlo simulation method to simulate the profit and loss of spot and futures in the future time,by solving the minimum conditional value at risk,the multi-futures hedging decision model based on conditional value at risk is built.The problem of risk controlling under the extreme market of futures price is solved.By minimizing the conditional value at risk of hedged portfolio,the tail loss of hedged portfolio is controlled and the extreme loss of multi-futures hedged portfolio is reduced.This model improves the efficiency of futures hedging.Through considering the margin,cost and future loss,the capital constrains of the futures hedging is established to avoid the failure of futures hedging because of being lacking of capital.Through dispersing the complicated integral of conditional value at risk to calculating the tail area of return distribution,the model is fitted to the risk controlling of any distribution and avoids the irrationality of prior assumption.