Author(s)

Xiaojin Li, Shusheng Wang, Xiaoya Cao

Corresponding Author

Xiaojin Li

ABSTRACT

The operating cost of airlines is affected to some extent by the fluctuation of jet fuel prices, airlines can reduce the risk of jet fuel price fluctuations through the aviation fuel hedging strategy. This paper analyzes the airline's jet fuel hedg-ing strategy by constructing the Copula-GARCH model to determine the hedging futures products and the hedging ratio. The empirical results show that the correlation between heating oil futures and aviation fuel spot is stronger, and the hedging performance is obviously better than crude oil futures, which can better avoid the risk of jet fuel price fluctuation. It is recom-mended that airlines uniformly formulate procurement plans for jet fuel spot and heating oil futures, form a portfolio asset, and adjust the size of futures positions based on fluctuations in jet fuel prices. At the same time, strengthen the internal control of the hedging operation and establish a responsibility mecha-nism to prevent speculation from harming the company's interests.

KEYWORDS

Jet fuel, hedging, Copulas, GARCH model