Using the hedging ratio, we can calculate the number of futures contracts needed to hedge the spot. The calculation formula is: the number of stock index futures contracts required for hedging = spot quantity/contract value. The calculation formula of contract value is: stock index futures contract value = futures index x contract multiplier.
Foreign debt hedging refers to the use of foreign debt for hedging. Hedging refers to the fact that traders sell (or buy) futures trading contracts with the same amount of hedging in the futures exchange while buying (or selling) actual commodities.
In fact, hedging in the futures market is a kind of venture capital behavior aimed at avoiding the risk of spot trading, and it is an operation combined with spot trading. Hedging principle: the principle that the transaction direction is opposite. The principle of similar goods. The principle of equal quantity of goods. Same month or similar month principle.
Hedging risk:
1. Basis risk: Basis refers to the spread between spot price and futures price. Hedging business forms hedging between futures and spot, and there is no absolute price risk, but it still faces the risk of unsynchronized changes in futures and spot prices, that is, basis risk.
2. Operational risk: mainly the risk of losses caused by the enterprise's own factors, imperfect internal processes, employees, systems and external events.
3. Liquidity risk: refers to the risk brought to the hedger by insufficient liquidity of futures contracts.
4. Trading system risk: the risk brought by the enterprise's unfamiliarity with the exchange variety delivery and hedging quota application system.