| Affected by the aftermath of the international financial crisis and continued fermentation of European debt crisis etc. together with the slowing down of domestic economic growth, the whole iron and steel industry is facing the plight of market demand dropping, severe overcapacity, prices falling sharply, industry profits decline. The production is reducing and manufactures even want to stop production. Traders were operating at a loss in the price inversion market. This article analyzes from the perspective of steel traders. As the futures market has the functions of price discovery and risk aversion, we put forward the traders enter into the futures market and carry on the hedging transactions for the enterprise products. Thus steel traders can achieve "the combination of futures and spot, locking in risk ", use financial instruments to avoid market risk.This article analyzes the risk of steel trader from the perspective of range,when they carry on ihe hedging transactions. We analyze macroeconomic factors and micro-market factors on the basis risk from an empirical point of view. And it shows that the macro-economic factors affect the trend of the basis, but the effect is not obvious. The micro-market factors have a significant impact on the basis. Therefore, the investors can select the point time to enter the market according to the micro-market factors. The major factor for basis is the lag factor. It means that when the basis largely deviate from the equilibrium value, the basis will self-correct for the existence of market arbitrage factors. So hedgers need to combine the basis of the degree of deviation, while they start hedging operations. From the perspective of the value of risk, this article uses the GARCH parametric method, semi-parametric method and the non-parametric method to calculate the basis risk. It can provide the method of risk management for the hedgers. It shows that non-parametric method is better than semi-parametric method and parametric methods in value at risk measurement of basis. It suits current steel market. |
