Spread Structure Of The Futures Price Discovery And Hedging Functions Play The Significance

Commodity markets have been developed fast in recent years. More and more investors have known the importance of commodity portfolio and futures hedging. The financial character of commodity is unfolded dramatically to all after 2007. Among the shinning commodity markets, China has been a super star. The incremental volume of major futures contracts surpassed competitors. However, the function of China's commodity futures markets is still weak. The domestic giants, either investors or hedgers, still choose the target markets outside of China. Unfortunately, the Waterloo always can be read between headlines. It's necessary for us to learn more, to research more and to develop more.In 2008, the volatile price of oil is stunning all the people. In July, the passion raised oil to $140 per bbl, but quickly and persistently it was plummeting. Now, the price $40-50 per bbl can be seen. During the turmoil, the term structure of NYMEX WTI was also changed in line with the price trend. After co-integration and Granger test of causality, we found the movement of oil price and term structure is related, and even the effective term structure makes the function of futures realized. Our fuel oil futures contract debuted on Aug. 25^th, 2004. But on the back of bad liquidity and limited investors, the futures market can't reflect totally its original functions. Comparing the NYMEX WTI and the SHFE fuel oil, the ineffective term structure should take the lion share of responsibility. On the base of above-mentioned analyses, some suggestions are made to help construct the reasonable term structure for our known or unknown energy markets.Meanwhile, the traditional price forecasting models and convenience yield models are introduced. Combined the new and complicated phenomena, the flaws to use those theorem are exposed. So there is a need to re-define the relationship between the price and the term structure.