Research On NZ Futures Company Treasury Bond Futures Hedging Strategy

Treasure bond futures is a mature,efficient,widely used financial derivatives.China launched treasury bond futures in 2013,provided a powerful interest rate hedge tool for investors.NZ Futures Company is a professional futures company,the company has a long period of development in the commodity futures and stock index futures hedging business,but the development process in treasury bond hedging business is slow due to the small market demand.Under the process of marketization of interest rates,the demand for treasury bonds futures hedging will increase,NZ Futures Company wants to launch treasury bond futures hedge business,provide customers with futures investment advice,and design treasury bond futures hedging proposal for clients.This article introduced the concept,functions and other theoretical knowledge of treasury bond futures,reviewed the development of treasury bond futures in China,elaborated the treasury bond futures contract and pricing knowledge.Based on the analysis of the current situation of NZ Futures Company's business,this article discusses the reasons why the company develop treasury bond futures hedging business slowly,reveals the necessity of quickly developing treasury bond futures hedging business,and enriching treasury bond futures hedging strategies.Meanwhile,based on the comparison and analysis of different hedging ratio estimation models in hedging,this article uses the TF1706,T1706 bond futures contracts to hedge the risk of 010107,019311,019523 treasury bond,uses the base point value method and OLS,B-VAR,ECM,GARCH models to estimate the rate of hedging,and compare the effect of result.This article not only finds that the combination of spot price and futures price with high correlation has better hedging effect,and by comparing the empirical results under different calculation methods,it can be found that the ratio calculated by the base point value method is higher than other methods,but less effective in reducing the risk than other methods.OLS,B-VAR,ECM and GARCH models can reduce the risk to a certain extent,and the effect is relatively close,of which the OLS method to the highest degree of risk reduction.According to the results of empirical analysis,combined with the NZ Futures Company's own situation,this article finds that the company should choose the futures has higher correlation with spot price to hedge when designing treasury bond futures hedging proposal for clients,and the choice of the hedging ratio estimation method should consider the client's risk preferences.OLS,B-VAR,ECM,GARCH suitable for risk-averse investors,and the base point value method is suitable for investors who take risks and benefits together.Moreover,NZ Futures Company can apply the dynamic GARCH method to hedge their treasury bond futures with their own practical experience in programmatic trading.In the end,the article puts forward some suggestions on the development of hedging business of NZ futures company's treasury bonds and the application of different hedging strategies for clients with different risk preferences.