Financial market, various financial instruments and financial derivatives are produced and developed according to this basic demand. Virtual economy provides tools for the real economy to manage risks, liquidity and optimize asset allocation, so that the real economy can enhance its ability to resist risks and achieve sustainable development. Hedging is an indispensable risk management tool for entity enterprises, and futures is one of the specific means of hedging for enterprises.
In most cases, the futures market and the spot market are linked in price, but the futures market occupies less funds and is more sensitive, which can reflect more macro and micro factors besides fundamentals. If we can effectively design the futures portfolio corresponding to the spot, enterprises can lock in future earnings and many risks can be resolved. Hedging refers to the way that an enterprise hedges the price risk by holding a futures contract that is opposite to its spot market position or using the futures contract as a substitute for its future transactions in the spot market.
Of course, this must be based on three conditions: the determination of futures varieties and contract quantities should ensure that the value changes of futures and spot positions are roughly the same; Future positions is opposite to the spot position; The time period held by future positions should correspond to the time period of risk assumed by the spot market. Satisfying these three conditions means that there is an offset relationship between the profit and loss of the futures market and the profit and loss of the spot market, which can reduce the price risk faced by enterprises.
Take the precious metal market as an example. Although the output and consumption of gold (1669.50, -0.20, -0.0 1%) and silver in China are among the highest in the world, the pricing centers of gold and silver in the global market are in London and new york, where the virtual economy is active, while the derivatives market of gold and silver in China is small, which has little impact on precious metal prices. After the financial crisis, the global precious metal market fluctuated greatly, so hedging is an urgent task for Chinese precious metal production and operation enterprises.
For example, precious metal producers such as gold and silver are faced with the risk of price fluctuation of finished products, and there is a cycle for purchasing raw materials and arranging production. If the price of finished products falls, its actual selling price may be lower than the expected selling price at the time of production scheduling, so the profit will drop and even a loss will occur.
If the price rises, enterprises that want to buy these precious metal products may increase their costs because of the rising price. The rising prices of raw materials and the falling prices of finished products can easily erode the profits of production enterprises and even affect the stable operation of enterprises.
If hedging is carried out, a certain proportion of reverse operations can be done in the futures market, and the losses caused by price fluctuations in the spot market can be compensated by the gains brought by price fluctuations in the futures market, so as to achieve the effect of controlling costs and locking in profits.
As can be seen from the above examples, hedging is an effective way for entity enterprises to manage risks. It allows spot enterprises to offset the price fluctuation that is not conducive to the operation of enterprises in the spot market through the futures market and resolve the price risk. For the derivatives market, the participation of hedgers can stabilize the market price and avoid the disorderly price fluctuation caused by speculation in the virtual part of the economy.
Hedgers are both operators of spot market and traders of futures market, which further strengthens the connection between futures market and spot market. Spot market is the basis of futures market, and futures market can guide spot operators to find prices. The application of hedging strengthens the connection between futures market and spot market. By promoting hedging business, the two markets can promote each other's development.
At the same time, a fair and just trading platform is a solid bridge connecting the real economy and the virtual economy, providing enterprises engaged in the real economy with tools to manage risks, increasing asset allocation varieties for investors and broadening investment channels, thus realizing the common development of the real economy and the virtual economy.
Case analysis of enterprise hedging
According to our field investigation, an enterprise is a well-known copper processing enterprise in China, and its main products are enameled wires and high-precision copper pipes. , in a leading position in domestic related industries. The industrial chain of the enterprise is relatively simple, mainly purchasing refined copper in the market, putting it into the production line for processing, becoming enameled wire and high-precision copper tube, and then selling it to downstream users. From the nature of the enterprise, the enterprise is not only in a completely competitive industry, but also a downstream consumer of copper, and it is also a relatively small profit but quick turnover enterprise. Therefore, in enterprise risk management, we should not only consider the risk of price fluctuation in raw material procurement and inventory, but also consider the risk of product sales and inventory.
(1) The raw material cost of raw material purchasing enterprises is almost pure copper, and other raw materials account for a small proportion, which is almost negligible. The average monthly copper consumption of enterprises is about 6000 tons. There are three main ways for enterprises to purchase refined copper: the first way is to sign a long-term purchase contract with large domestic copper production enterprises, and the purchase volume accounts for 80% of the total purchase volume. Purchase contracts are usually quantitative and not priced, and the monthly purchase price is determined by the monthly average spot contract settlement price from last month 16 to this month 15. The second way is to purchase from abroad at a fixed price, and the purchase volume accounts for 10% of the total purchase volume. The fixed price method is the monthly average price of the official LME settlement price for the next month. The third way is to purchase by other domestic pricing methods, and the purchase volume accounts for 10% of the total purchase volume. The pricing method is the spot monthly futures price on the day of purchase. (2) In terms of finished product sales, the production cycle of copper tubes is only two days, which is basically stable sales, and the daily sales volume is relatively average. Sales are mainly carried out in the form of average price, and the pricing method is the average price of the monthly contract settlement price of futures spot in the current month plus a certain processing fee. From the perspective of the whole year, the monthly product sales of enterprises are basically the same as the amount of copper purchased. In the sales of enameled wire, 60% is sold at the spot monthly contract price plus a certain processing fee, 20% is sold at the spot monthly contract average price plus a certain processing fee within 7 days, and the remaining 20% is determined at the spot monthly contract average price plus a certain processing fee. Generally, the processing cost will not be adjusted after it is determined, and the processing cost is relatively low, about one ton of 300 yuan. (3) In order to maintain their position and competitive advantage, inventory enterprises must ensure timely supply to downstream enterprises and maintain the continuity of their own production. Therefore, enterprises must have a certain scale of standing stock. At present, the standing stock of enterprises is about 3000 tons, which can basically meet the consumption demand for half a month. When the actual inventory is lower than the standing inventory, the enterprise will replenish the inventory, and when the inventory is higher than the standing inventory, the enterprise can adjust the inventory in other ways. The method of confirming the value of enterprise inventory is based on the monthly average financial spot price.
(4) Case Enterprise Risk Measurement For copper processing enterprises, the risks of enterprises mainly come from two aspects: first, after signing a long-term product sales contract, enterprises face the risk of rising copper prices before purchasing copper raw materials, which will lead to increased costs; Second, after the enterprise purchases the raw material copper, the downstream products have not been sold, and at this time, it faces the risk that the price drop will lead to a decrease in profits. In other words, the risk of the enterprise comes from the amount of open positions exposed outside the contract, facing price fluctuations and without any hedging measures. In order to consider risks from a global perspective and make effective use of integrated resources, we tend to unify the raw materials, inventory and products of enterprises to manage the risk of price fluctuations and turn them into an overall asset management scheme. We get a preliminary formula to measure the total risk exposure of an enterprise: opening amount = standing inventory+(current purchase amount-current sales amount)