Optimization Of Dynamic Hedging Strategy For OTC Options Of Live Hogs "Insurance + Futures" Project Of Z Futures Company

China is the largest pig producer and pork consumer in the world.The steady operation of pig industry is related to the development of "agriculture,rural areas and farmers" and the stability of price level.However,due to the impact of the "pig cycle",the pig industry has the problem of sharp price fluctuations.In order to solve this problem,Dalian Commodity Exchange has innovatively launched the live hogs "insurance+ futures" product.In this business model,as an important participant,futures companies choose what kind of risk hedging strategy is particularly critical to their business.Based on the background of the development of live hogs futures in China,and on the basis of combing the agricultural product risk management theory,option pricing theory and dynamic hedging strategy theory,this paper expounds the live hogs "insurance + futures" project carried out by Z futures company,focuses on the static hedging strategy and its operation results in the risk hedging link,and points out the shortcomings of this hedging scheme.Then,two different dynamic hedging strategies,fixed time point hedging and fixed interval hedging,are used to optimize the original scheme.Finally,the hedging effects before and after scheme optimization are compared and analyzed from two aspects of hedging income and hedging error,so as to select the best dynamic hedging strategy.The study found that in the live hogs "insurance+ futures" project,the effect of adopting dynamic hedging strategy to manage the risk exposure of futures companies is generally better than that of static hedging.When adopting the fixed interval hedging strategy,we should comprehensively weigh the benefits and risks of hedging and select an appropriate tolerable delta interval to reduce the hedging deviation.The risk hedging scheme designed by futures companies is very critical to their own profits and the whole project.No matter what hedging strategy they adopt,they should analyze all kinds of risks they face and evaluate the risks scientifically.