PROJECT: Hedging of China Steel Industry

This project is to design and simulate a financial case for the Trading Lab program of Shanghai Advanced Institue of Finance, Shanghai, China, under the supervision of Prof. Tao Wang.

In this project, we design a hedging strategy for China steel industry and simulate it on the platform of RIT developed by University of Toronto. This case challenges traders’ ability to respond to the highly dynamic world of China Steel Industry. There are commodities of steel, iron ore and charcoal in the physical market. Meanwhile, we can use corresponding futures to hedge them and find arbitrage opportunities.

Primarily, traders will buy and sell iron ore, charcoal and steel in response to their analysis of various news releases affecting the price of them. In addition, traders will be challenged to take advantage of arbitrage opportunities occurring in the spot and futures markets as well as producing steel from iron ore and charcoal. Lastly, traders will learn about the physical requirements to trade physical products, such as production ratio and smelting cost.