Hedging tool selection
China Ocean Shipping Company as Forward Freight Agreements (FFA) changes in fair value losses are massive, Air China Limited huge loss of fuel hedging, CITIC Pacific and a series of failed Australian gambling time occurrence, hedging instruments selection, implementation of hedging strategies become the focus of attention. Based on the detailed analysis of the three cases compared long-term futures, options, structured financial instruments, features, and the choice of hedging instruments are explained.
November 2004, China Aviation Oil Singapore, the Group announced its subsidiary, China Aviation Oil (Singapore) positions in the oil options trading huge losses generated the message. Options Trading CAO lost in about 40 billion yuan (about 550 million U.S. dollars), making it to the Singapore High Court had filed for bankruptcy protection. Since the financial crisis of 2008 … ….
1. Hedging Overview
According to the U.S. Commodity Futures Trading Commission (CFTC) of the definition of the concept of hedging, hedging transactions must include the true five elements: cash management and futures trading the same or related species, in the opposite direction, a considerable amount of time equal to or close to purpose is able or willing to bear the lock business costs or profits.
(1) the basic characteristics of hedging.
(2) the logical principles of hedging.
2. Hedging Case Study: long-term futures
China Ocean Shipping Company-owned dry bulk carrier companies based on market trends and the Company’s actual condition, ability to lock the lease cost of shipping, pre-purchase a certain number of FFA. FFA that forward freight agreements … ….
3. Hedging Case Study: Options
Air China Limited (hereinafter referred to as Air China) the specific content of the contracts signed are as follows: it chooses the way of the option position, that is, a put option and simultaneously selling a call option to buy.
4. Hedging Case Study: Structured financial instruments
A CITIC Pacific about 4.2 billion Australian dollars of investment projects to do the exchange rate hedging, hedging tools used for the cumulative option, the principle is the investment bank set a rate … ….
5. Hedging tool for comparative analysis of selected
As can be seen from the above case studies, tools for hedging the improper use of hedging the main reason for the failure. So I think, forward, futures, options and other basic tools can complete the appropriate hedging strategies, and complex structured products is not easy to understand and use … … the ultimate goal should be the same: to calculate the appropriate hedge ratio, to avoid price risks, locked product cost.
