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Validity Test of Hedging of Chinese Live Pigs Futures

In: Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2022)

Author

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  • Baiji Ye

    (Zhejiang University, Department of Economics)

Abstract

In January 2021, live pig futures will be officially listed on China’s Dalian Commodity Exchange, aiming to reduce the price volatility risk of the pig industry and its related upstream and downstream enterprises. In order to examine the hog futures market since the extent of the transfer price risk function, the use of the live pig 2109 China dalian Commodity Exchange futures settlement price and wholesale price 20 provinces pigs data, using the mature of error correction model (ECM) to determine the pig the optimal hedging ratio of futures hedging transactions, Ederington’s method was used to quantify the effectiveness of pig futures hedging by using the variance of unhedged transactions and the percentage of variance change after hedged transactions. The results show that the price risk transfer ability of Chinese pig futures market is weak, and the effectiveness of price discovery, the consistency of the combination of the future and the present, and the ability to avoid the pig cycle are still important factors affecting the hedging efficiency.

Suggested Citation

  • Baiji Ye, 2022. "Validity Test of Hedging of Chinese Live Pigs Futures," Advances in Economics, Business and Management Research, in: Faruk Balli & Au Yong Hui Nee & Sikandar Ali Qalati (ed.), Proceedings of the 2022 International Conference on Economics, Smart Finance and Contemporary Trade (ESFCT 2022), pages 1149-1160, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-052-7_129
    DOI: 10.2991/978-94-6463-052-7_129
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