Research for theHedging Capability of the Gold Domestic Board and the Gold International Board on Crude Oil
Received date: 2023-08-10
Revised date: 2024-01-28
Online published: 2024-08-27
The Shanghai gold domestic board，gold international board，and Shanghai crude oil futures market play significant roles in emerging financial markets. However，the hedging capability of the gold domestic board and international board in relation to domestic and foreign crude oil markets are not clearly defined. It is crucial for regulators to assess the differences in hedging capability between the two gold markets in domestic and foreign crude oil markets，and to explore the underlying reasons. It is also crucial for regulators to have a comprehensive understanding of the evolution of gold markets in order to effectively implement risk management strategies.This study focuses on the gold domestic board，gold international board，Shanghai crude oil futures，and WTI crude oil futures as the research objects，analyzing the variations in risk hedging from the gold international board to Shanghai crude oil and WTI crude oil from an international perspective，as well as from the gold domestic board and international board to Shanghai crude oil from a domestic perspective. The study utilized the DCC-MGARCH model to analyze the dynamic correlation of yield among the gold domestic board，gold international board，Shanghai crude oil，and WTI crude oil. Additionally，the hedging capabilities of gold on crude oil was evaluated from the perspectives of extreme risk and falling prices. Lastly，an examination of volatility spillover and price discovery function provided insights into the varying hedging abilities of Shanghai and WTI crude oil on the gold domestic and international boards. The findings indicate that the correlation coefficients between gold domestic and international boards，Shanghai crude oil，and WTI crude oil exhibit dynamic characteristics. Additionally，the hedging capability of gold international board on Shanghai crude oil is weaker than that of WTI crude oil. This is attributed to Shanghai crude oil’s susceptibility to risks associated with WTI crude oil，as well as its lack of significant correlation with gold international board compared to WTI crude oil. Thirdly，the hedging capability of the gold international board for Shanghai crude oil is weaker than that of the gold domestic board. This disparity can be attributed to the inadequate market liquidity of the gold international board and its lagging price discovery function compared to the gold domestic board.
Junwei JI , Yifei CHEN , Jing LU , Han LUO . Research for theHedging Capability of the Gold Domestic Board and the Gold International Board on Crude Oil[J]. Gold Science and Technology, 2024 , 32(4) : 731 -744 . DOI: 10.11872/j.issn.1005-2518.2024.04.117
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