A Study On Time-varying Hedgeing Ratios Of Mutiple Oil Futures

As the blood of modern industry, oil plays a very important role to any industrialized country, in the same time the volatility of international oil prices have never stopped. Company with the increasing oil consumption in China, more and more oil will be imported, and with the oil prices in China gradually go in line with the international, the volatility of international oil prices will play more deeply impact on China, especially on some oil enterprise. So risk management and control must be conducted on the volatility of oil price. In the studies of oil price volatility risk management, one of the most important issue is the determination of hedging ratios. Through hedging models to determine the proper hedging ratios can improve the hedging efficiency and effectively averse the risk of spot markets.Starting from the analysis of bias risk dispersion which multiple futures hedge carry on, this paper build the minimum variance and the optimal mean-variance hedging ratios models using multiple futures and derive the two futures optimal hedging ratios. Then the hedging ratios estimation method are gived: conditional expectation of The futures earnings are estimated by the VECM and the conditional covariance matrixes are estimated by DCC-MVGARCH models, finally the optimal hedging ratios will be calculated through the derived formulas.At last, comparative empirical study of the oil market hedging ratios is gived. Through the empirical study, this paper get some main conclusions are as follows: the use of the oil futures to dynamic hedge for oil spot can effectively reduce volatility risk and the optimal multiple oil futures hedging ratios have better performance than the single; in addition to the optimal mean-variance hedge ratio estimated by the BEKK-GARCH model is superior to the DCC-GARCH model out of sample, the ratios estimated by the DCC-GARCH model is better than the BEKK-GARCH; with the risk aversion parameters increase, the optimal mean-variance hedging ratios will gradually become the minimum variance hedging ratios.