A Study In Profit Model Of Copper Financing

China’s total import and export volume during 2013 amounted to $ 4.16 trillion, surpassing the United States as the world’s largest country in goods transaction. With the trend of RMB appreciation, not only foreign hot money flow into China through current account and FDI, domestic speculative funds under capital controls flow out through various channels, in order to get arbitrage earnings. This situation will lead to the loss of China’s industrial capital if not forbidden. As a representative of financing trade, copper financing trade refers to the financing transaction mode that open long-term letters of credit by means of importing copper, invest in financial sector after the goods become cash, and return foreign currency loans in RMB. The copper used in this case is called financing copper.Copper financing trade is a system and regulatory arbitrage, to obtain improper benefits through irregularities, likely to cause mass outbreaks of systemic risk. It is often difficult to distinguish, and there is no effective punitive measures. In this paper, general characteristics of copper financing trade were reviewed. With the study of specific operational procedures, I summed the profit model of copper financing based on several reasonable assumptions, and created formulas for calculating revenue of copper financing trade. Differential data of copper financing income has characteristics of peak and fat tail, and copper financing market can be considered as a relatively independent market with a strong efficiency, because it is the convergence market of foreign exchange market, credit market, commodity market. In this paper, I fitted the GARCH (1,1) model. To further improve on the asymmetric effect, I also fitted the threshold GARCH (TARCH) model, a better explanation of several expansions and contractions of copper financing scale in history. I put forward the reaction mechanism of stimulus from copper financing market, and offered corresponding policy recommendations.