Research On Risk Management Of Iron Ore Futures Hedging

Since the beginning of 2010,the long-term iron ore contract agreement pricing system collapse, the international iron ore market for many years by the world’s three major mines monopoly situation is broken, trade price follow the market price, iron ore price sharp fluctuations and the corporate hedging demand strongly. In October 2013, iron ore futures in Dalian Commodity Exchange traded on the market, lots of steel companies can participate in the iron ore futures hedging. In recent years, however, in terms of the companies involved in hedging risk events occur frequently, the effect of hedging or is not satisfactory. Therefore, in my opinion, it is necessary at the beginning of iron ore futures market to research the hedging, to avoid the risk event occurs and then to remedy the situation.First of all, this paper summarizes the relevant principles of hedging, and to sort out the existing research. Through understanding of iron ore spot market price and its influencing factors research, this paper summarizes seven iron ore futures hedging risk: market risk, undermargined risk, basis risk, flow risk, settlement risk, hedging ratio model selection risk, internal control risk. Then, these risks one by one analysis, summing up the risk characteristics of iron ore futures, and combined with iron ore futures risk characteristics and corporate exposures and focus on hedging risk prevention of comprehensive analysis. Finally, from the focus on the establishment of corporate hedging risk management organizational system, hedging and internal control system, hedging Performance evaluation system to complete iron ore futures hedging risk prevention system, to achieve the purpose of risk aversion.