tailieunhanh - Developing a fuel futures market for hedging risks of price fluctuation in Vietnam

The paper aims at analyzing recent fluctuations in the fuel prices in the world in general and in Vietnam in particular. The author also reviews strengths and weaknesses of derivatives which have been thus far employed to prevent risks to the fuel prices in Vietnam’s market and then recommends a model of fuel futures market for Vietnam. | 18 | Nguyễn Thị Liên Hoa & Cái Phúc Thiên Khoa Developing A Fuel Futures Market Developing a Fuel Futures Market for Hedging Risks of Price Fluctuation in Vietnam NGUYỄN THỊ LIÊN HOA* & CÁI PHÚC THIÊN KHOA** ABSTRACT The paper aims at analyzing recent fluctuations in the fuel prices in the world in general and in Vietnam in particular. The author also reviews strengths and weaknesses of derivatives which have been thus far employed to prevent risks to the fuel prices in Vietnam’s market; and then recommends a model of fuel futures market for Vietnam. Hopefully, the construction and operation of such futures market will help predict and prevent fluctuations in the fuel prices, and improve the domestic futures market. Keywords: fuel futures market, fuel price risk management 1. INTRODUCTION In recent years, Vietnam has witnessed some fierce fluctuations in price of crude oil, gasoline, gas, etc. which have resulted in rises in prices of consumer goods and services in the domestic market. In the field of energy, many related enterprises are faced with lots of risks in the post-crisis context. Therefore, utilizing derivatives in general and the futures market is one of effective ways to deal with these problems. In the paper, the author would like to develop a model of fuel futures market to administer risks of fuel price fluctuations in the Vietnam’s market. 2. THE THEORETICAL BACKGROUND AND ANALYTICAL FRAMEWORK a. Theoretical Basis and Analysis Framework: Empirical studies by R. Sauter & Awerbuch (2003), and Brown & Yucel (2000) did figure out sharp impacts of crude oil price volatility on the economy. Tan (2010) analyzed empirical models of some fuel exchanges in the world and proved the crucial role of fuel derivative agreements in preventing risks. Moreover, surveys by Virtual Metals Research & Consulting Ltd. (2005) for derivatives exchanges in South America, and researches by Blanco et al. (2005), Carter et al. (2003), Daniel (2001), Hamilton (2008), Medova &