An Empirical Study On Transaction Strategies About Soybean Futures Hedging

Economy globalization continues, and business scale of firms expands. Firms face a more turbulent external market, exposed to dual risks from both the product market and the factor market. The futures markets were born to avert the risk. Actually, making great effort to develop hedging can not only benefit the production of the firms but also reduce the illegal speculation in the futures markets and promote the healthy development of futures markets.The theory of hedging has roots in Keynes's thoughts, which hold views that hedging is a natural behavior of firms, which want to avert the risk of price fluctuation. The purpose of the reaction is to transfer the risk from the current price transaction and provide insurance for current market transaction profit. Walking develops a hedging theory named as "pursuit for profit based on basic spread", which holds that hedging is one interest-seeking activity. Since the birth of the portfolio theory originated by Markowitz, hedging theory has been developed to a new level, the optimal hedge ratio and the effectiveness of hedging become two hot subjects of the field. Because different risk measures and utility functions are employed, researchers build different models and enormous empirical analyses have been done.As for the optimal hedge ratio, many scholars have done thorough researches. Traditional strategy of hedging holds that the optimal hedge ratio is one and fixed. The opinion, however, is based on the hypothesis that the basis is constant, which doesn't meet the reality of futures markets. The minimum variance strategy of hedging thinks differently viewing hedging as an investment portfolio in both current market and futures market. A hedger decides his position in both markets based on the expected return of the portfolio and its variance. HKM strategy takes the time into account, which thinks the optimal hedge ratio is a function of time to delivery date. Using the historical data from Chinese soybean futures market, this thesis make an empirical analysis following above mentioned three strategies, and concludes that traditional strategy of hedging is the least effective, HKM strategy is the most, and the minimum variance strategy and HKM strategy reduce the risk of the hedgers more effectively than traditional strategy.In recent years, China's futures markets resumed its vitality after an overhaul and many kinds of commodity futures have been launched. But hedging is still undeveloped. The thesis concludes that developing more hedging participants, strengthening futures legislation and advancing the standard of management of exchanges are feasible measures toward a more effective and deeper futures markets.