Theory And Empirical Study On China’s Commodity Futures Pricing

With the stable and rapid development of China’s economy, as a manufacturing power, China’s import demand of international commodity is growing gradually, the international commodity market price fluctuation has substantively and seriously negative impact on Chinese commodity import costs and related economic activities. As a major importer and consumer in the global commodity market, in order to strengthen pricing power and voice in the international commodity market and to protect the Chinese citizens, corporate interests and our nation’s economic security, it’s urgent to establish and perfect the domestic commodity pricing mechanism for China.Under this background, based on international commodity futures market pricing literature and combined with the actual situation at home and abroad, this paper studys the pricing mechanism of commodity futures to promote the process of our country commodity futures pricing mechanism further and deeper.This paper proceeds from the development situation of world commodity futures market, by comparing China’s commodity futures market present situation with the overseas commodity futures market situation, we clarify the gap and relationship between China’s commodity futures market with foreign commodity futures market so as to find out the problems and difficulties of commodity futures market in China. Based on Chinese Daqing crude oil and Brent crude oil price data, by using cointegration theory, based on vector autoregressive Granger causality test, this paper does empirical research on linkage between domestic oil price with international oil price and the short-term fluctuation model. According to the reality of the pricing mechanism of China commodity futures market and linkage between China’s main commodity spot price and world commodity spot price, this paper analyses the factors on the pricing of commodity futures contracts.Combined with the domestic and foreign literature, this paper analyzes the commodity futures contracts pricing from the hedging pressure effect and systemic risk, the trader types and structure, transaction cost and hedging cost, the futures maturity and the term structure as well as the political, economic and other factors respectively.Two main models of traditional commodity futures pricing, namely the risk premium model and convenience yield model. After introducing these two models in details, in this paper, we address differences and relationship between them, and does empirical analysis on commodity futures pricing based on these two models. Under the condition of scarcity for underlying commodity, this paper comes up with the theoretical basis of price decomposition, then analyzes the oil related measurement problem and applys our procedure to derive scarcity prices and returns. Finally, in this paper,we estimates a multiple variable factor model and a conditional beta pricing model with simplified form to investigate significance, size and cyclical character of risk premiums inherent in futures returns and scarcity returns by utilizing the generalized method of moments estimation (GMM) method.