Traditional equilibrium

For a long time, the domestic futures market only has commodity futures trading, more precisely, it is consumer waste futures in commodities. Because the underlying assets corresponding to commodity futures are physical objects, which have a wide supply demand and are accompanied by full transactions in real life, traders tend to adopt the traditional general equilibrium analysis method in economic analysis when judging the trend of contract prices, which is commonly called basic analysis: people try to judge the relationship between supply and demand through information obtained from various channels and determine the equilibrium price on this basis. Then according to the functional relationship between the futures price and the current price (f = se (r+u-y) (t-t)), the corresponding futures price is judged. When the market price f'> is f, it is thrown out, and when f' < f, it is bought. This is actually a (comparative) static analysis method. This analysis has many defects: first, it is impossible for people to grasp the statistical data related to supply and demand and the stable functional relationship between these data and prices in real time, so it is impossible to determine the equilibrium price; Secondly, Y (convenience income) in the price function relationship between the future and the present cannot be quantified, so it is impossible to determine the futures price according to the spot price; Thirdly, even if a reasonable futures price is determined, because traders in the futures market have different trading purposes and risk preferences, the fluctuation direction of market prices may not necessarily point to that "reasonable futures price" even in the long run. Because of this, many analyses based on the traditional general equilibrium theory are more about explaining the current market behavior than judging the price trend.

Although there are many defects mentioned above, because the original subject matter of a commodity has a solid market foundation, its commodity attributes still play a key role in the price composition. Because the ordinary supply-demand curve is carried out under the traditional assumption that other prices remain unchanged in the competitive environment, the price elasticity of commodities is within the normal range because of its incomplete substitutability, which makes the supply-demand curve have equilibrium points in most cases and the supply-demand analysis can be carried out smoothly. Therefore, the basic analysis based on the traditional general equilibrium theory can still help traders to judge the price trend to some extent.

Financial futures corresponding to commodity futures, whose target is the price of a certain financial asset, have prominent financial attributes.

Different from commodities, we consider two basic factors when analyzing the price of financial assets: time and risk. In other words, we are studying "how to allocate resources in an uncertain environment".

Comparing the price formation mechanism of two different subject matter, we find that from the demand side, the demand curve is formed under the goal of maximizing consumer demand and income constraints, and the position on the curve is actually determined by external forces (such as consumer preferences); The supply curve is formed under certain technical and market constraints, and the goal is to maximize the profits of suppliers. The intersection of the two curves is the equilibrium output (consumption) and the optimal price parameter. This leads to the mechanism of quantity and price. Theoretically, the price must be at an equilibrium point, otherwise the market supply and demand forces will play a role.

The price formation mechanism of financial assets corresponding to financial futures is very different from that of commodities. Financial assets aim at maximizing the utility of investors and obtain a balanced asset price under budget constraints. Here, the supply side of financial products does not seem to exist, and we can only analyze it from the demand side to deduce the equilibrium state and equilibrium price. An important difference between financial market and commodity market is that there is no clear distinction between supplier and demander, and the supplier of financial products is not limited to industrial and commercial enterprises. Except the original supplier of financial products, any transaction subject in the financial market may switch between the supplier and the demander at any time. Coupled with the short-selling mechanism, arbitrage activities and replicability of financial products in financial markets, the supply of financial markets can be considered unlimited in many cases. In other words, the supply curve of the financial market may be horizontal. In this state, the traditional general equilibrium does not exist, and once the analysis of supply and demand loses its meaning, the volume-price mechanism cannot play its role. In the financial market, there is no general equilibrium, but with the flow of capital, no arbitrage equilibrium can be formed: that is, when the prices of other assets in the market are given, the price of an asset fluctuates to a certain point, so there is no arbitrage opportunity in the market.

In the financial product market, because the quantity-price mechanism does not exist, it is impossible to deduce the optimal price parameters from the equilibrium quantity. People no longer consider the quantitative change behind the price movement, but take the market price as the output variable. Because financial products are highly substitutable, investors can switch between the supplier and the demander at any time, so they are concerned about the relative price level between various financial products. It can be understood that the pursuit of absolute pricing in the commodity market is based on static analysis; What the financial market seeks is relative pricing, which requires more consideration of time (continuity) and risk (uncertainty).

Make an image metaphor: the financial product market is like a plane water system, and the price of financial products is like a lake. Assuming that there is a river connecting the lake and there is no barrier, when the brightness (fluidity) of water increases, the water level (price of financial products) of the lake will increase, and vice versa. The water level of each lake (the price of financial products) effectively regulates the water quantity (liquidity). The water level of a lake depends on the total upstream water volume and the storage capacity of other lakes, and the moving water level is arbitrage-free equilibrium.