Economy Function Research Of Futures Market In China

The initial purpose of the options is to protect traders from financial loss by entering into a transaction. Following by the developing of the options, there are two main functions, the hedging and price finding. The hedging is the original power of the development, it causes in the creating and developing of the market; and the price finding,which relates with speculators, is the core function in the option market. And in the domestic options market, the using and developing situations of the above two function is seem as an important topic in options'academic area. Different from the foreign market, the domestic options market has a short live time and some special factors, so a broader area must be included to understand and to evaluate the domestic option market. My essay will completely introduce the main function of the domestic option market, and discuss with real example.The data of options price and underlying assets'price, in interms of copper, bins and wheat from 6 Jan,2006 to 25 June,2010, are included in the essay. It will be used to check the efficiency of the hedging and the price finding functions in the domestic market.First of all, the stability and volatility are checked by the underlying assets's price with copper, bins and wheat. Then, the OLS, B-var and ECM are chosen to estimate the optimal hedging ratios for the three goods. Finally, using three model calculate the correlation coefficient ratio. The results show that there is a obvious relationship between the option price and the underlying assets'price. So it indicates that the domestic market has been had a primary hedging function; furthermore the option of copper has the best efficiency, follows by bins and wheat. As a result, there is a obvious risk in the wheat options.Secondly, the relationship is checked by the options price of three goods, then granger causality test is choose to make a further annalysis and engle-granger is used in the final step. The result shows that there are strong relationship and similar distributing in the options price and underlying assets'price. And the prices related the copper and the bins are influenced with each other. However, for the wheat, the option price can lead the underlying assets'price but the underlying price does not lead the option price. In the end, the options price has a correlation ship, it is the unbiased estimator of the underlying assets'price and it has a forecasting function for the underlying price in the strike date.On the one hand, the domestic option market has a obvious development:the marketing functions become useful in the real life, the information by communicating with foreign market is increased and partial domestic underlying assets has a obvious influences on the international option market. On the other hand, there are still some problems in the domestic option market.The essay concerns the problems in each marketing function and provide some advises in the final part. As a result, the essay aims to have a clear understanding in the fundamental options function and the special functions in the domestic option market, and find out the problem and weakness to improve the domestic option market to service the domestic economics..