Dce Soybean Products Futures Hedging Research

Agricultural product futures as an implement to evade risk of price fluctuations is proved to be effective through nearly a hundred years of practice and play an extremely important role in developed countries. After China's accession to the WTO, domestic and international markets of agricultural products gradually form a unified market, and China's existing markets of agricultural products is affected and challenged by foreign markets. In the stable futures markets to avoid the risk of price fluctuations through hedging is an effective way to increase income of farmers and related enterprises.Soybean industry and its products can have an important knock-on effect on the national economy. How the entire industry to avoid the risk of price fluctuation by hedging is of great significance. The relationship of the price between soybean, soybean meal and soybean oil is compared to iron triangle by people of this field, because their price fluctuations have high correlations. Based on the analysis of the relationships of their three, I made an empirical study on hedging function of their futures markets and made some suggestions on improving.Liquidity, correlation and basis fluctuation can all have an impact on hedging. So in this paper I used liquidity ratio Amivest, Correlation Analysis, Basis Fluctuation Analysis and EC-GARCH Hedging Performance Analysis to measure hedging function of futures markets of soybean, soybean meal and soybean oil. After that, I also studied cross hedging by using soybean futures. I concluded that soybean futures' hedging performance was the best, the second was soybean meal futures, and the last was soybean oil futures; the liquidity of soybean futures was the best, but the liquidity of soybean oil futures was lacking, which can lead to liquidity risk. In the empirical study of cross hedging, I suggested that to avoid the risk of soybean meal prices, using the original hedging was better and to avoid the risk of soybean oil prices, investors should consider to adopt cross hedging by using soybean futures when the liquidity of the soybean oil is lacking.