When hedging is complete, the hedging ratio is equal to 1; when hedging is partial, the hedging ratio is less than 1.

The hedging ratio refers to the ratio between the total value of the futures contract determined by the hedger when establishing a trading position and the total value of the spot contract to avoid risks in the fixed income bond spot market. ratio. Determining the appropriate hedging ratio is the key to reducing cross-hedging risk and achieving the best hedging effect.

Because there are many types of coupon rates for fixed-income bonds, most of them are not equal to the interest rate specified by the underlying asset of the interest rate futures contract (usually virtual bonds). Therefore, when using interest rate futures to hedge fixed income bonds, the relationship between the spot value of the fixed income bond and the value of the required interest rate futures contract is not 1:1. When avoiding the interest rate risk of the same amount of different types of bonds, , futures positions of different par values ??are required in the interest rate futures market. Moreover, the existence of basis risk will greatly affect the effect of hedging. Using the concept of hedging ratio, hedgers can reduce the impact of basis risk as much as possible.