Short Term Forecast Of Metal Prices: Commercial Application For Operation On Forwards And Optimization The Hedging

The system of short term forecast of metal prices at LME is based on correlation between prices within the quarter forward and at the first place by economic parameters at the West, determining the consumption of metals. Such economic parameters are presented by data of indexes of Western World industrial production (WW IP), official data of IP and Dow Jones indexes at USA. For price forecast within the quarter forward (one day ahead, 3 day -65 days MA forward prices) are significant the changes of actual prices (official and close) at the past and the parameters of daily trade at LME at the past (futures turnover, open interest, LME stocks). It is developed subsystem of price forecast within the quarter forward based on analytical approach determining the relations between the participants of the market. It gives the opportunity to reduce the number of empirical coefficients at the model and receive good accuracy of forecast the MA prices and its direction at the future. Very important part of short term forecast is subsystem determining analytically the probability that the price forecasted for the next trading day will be the maximum or minimum daily price within the quarter forward. The thresholds probabilities are defined by identification the model at the past by maximal commercial efficiency. Such system was tested at the past at period since 2000 till 2005 and gives very high commercial results at operations on 1M forwards and hedging the sales of nonferrous metals traded at LME (primary aluminium, light alloys, nickel, copper, zinc, lead and tin).