SHFE/LME Copper Future Arbitrage Analysis

Along with the economics development, copper is widely applied in more and more domains. The copper price and the whole macroeconomic situation are quite correlated. When the economy is in the expansion cycle stage, copper demand increases, and price also rises; otherwise, the copper price will be murky. Because of its good finance characteristics, the copper is popular with the global investors. The domestic copper future exchange began in 1991, and has a history of 16 years, regarded as one of the main exchange commodity. The Shanghai copper price and the international copper price linkage is stronger, it follows international domestic economic situation, has fully displayed the price discoverying function, and is the pricing base of our country's copper production, expense, merchandise sale, the raw material purchase and the trade circulation. This article's main work is to summarize research of domestic and foreign researchers, utilize VaR model to analyse SHFE/LME copper future arbitrage risk value. The main technical method is the Garch model as well as the variance -convariance matrix. This article is divided into four chapters, starting from the theory summary, risk factor analysis, computation model to real diagnosis research and conclusion. After assuming the change of copper price satisfies special mode, use Taylor series expansion method to obtain the analysis form of SHFE/LME copper arbitrage investment profolio VaR. The conclusion of the analysis form is consistent with the result of the traditional qualitative analysis to the factors that affect the arbitrage. Through utilizing AR (1) -GARCH (1,1), GARCH (1,1) -M and AR (1) -EGARCH (1,0) models to estimate single sheet stock contract daily return rate risk value with portfolio risk value, we produce a simple effective SHFEL/LME copper arbitrage risk management method. This article has made up the insufficiency of domestic SHFE/LME copper arbitrage risk research work.