Risk Analysis and Risk Avoidance for Speculative Behavior in Futures Markets--Based on the AVIC Oil Incident and Related Case Studies
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Risk Analysis and Risk Avoidance for Speculative Behavior in Futures Markets--Based on the AVIC Oil Incident and Related Case Studies

Chengxiao Ye 1* Zhixin Yuan 2, Jiahua Wang 3, Jiacheng Ping 4, Siying Wu 5
1 Central University of Finance and Economics
2 China University of Political Science and Law
3 The Ohio state university
4 Shanghai University
5 Hubei University of Economics
*Corresponding author: YE19941331028@outlook.com
Published on 11 July 2025
Volume Cover
AEMPS Vol.202
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-263-8
ISBN (Online): 978-1-80590-264-5
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Abstract

We study effective measures to avoid speculative risks by corporations. We analyze “AVIC Oil Incident” (The company CAO (a physical purchaser of jet fuel and a supplier of imported jet fuel to China's civil aviation industry.) suffered a huge loss of about $550 million in 2004 for speculative trading.), its background and the development process of the incident. We then analyze the reasons for the huge loss of CAO, including lack of internal control and external supervision, weak risk management system, over-confidence of the CEO and ineffective information disclosure. After analysis of speculative risks, we propose the effective measures could have been taken to reduce the loss of AVIC. After that, we suggest solutions, including implementing risk hedge, improving internal communication and supervision mechanism and strengthening external regulation. At the end, we make a conclusion of the exposure of the whole financial incident of AVIC and also make an exception for the exploring aspects of future researches which include dynamic evolution, influencing factors and new characteristics and trends of speculative behavior.

Keywords:

futures market, speculative behavior, risk avoidance

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Ye,C.;Yuan,Z.;Wang,J.;Ping,J.;Wu,S. (2025). Risk Analysis and Risk Avoidance for Speculative Behavior in Futures Markets--Based on the AVIC Oil Incident and Related Case Studies. Advances in Economics, Management and Political Sciences,202,50-63.

References

[1]. Li et al., 2007. Analyzing AVIC Oil from a Risk Management Perspective. 27.1: 23-32.

[2]. Lu et al., 2007. Reflection on "CAO" Incident Using the Behavioral Finance Theory.https: //www.semanticscholar.org/paper/Reflection-on-%22CAO%22-Incident-Using-the-Behavioral-Ai-ping/7011017d43c7ccd7d34bab5496e9f7a33a42f750#related-papers

[3]. Gong, 2015. Case Study of the AVIC Oil Incident.https: //xueshu.baidu.com/usercenter/paper/show?paperid=675520ed9637c3d1ed99a188ce0c8e47& site=xueshu-se& hitarticle=1

[4]. ChinaEconomyWebsite, 2005.https: //finance.ce.cn/stock/gsgdbd/202005/04/t20200504-34834012.shtml

[5]. Sina Finance, 2009. https: //finance.sina.com.cn/futuremarket

[6]. Jackson, K. T. (2009). The China Aviation Oil Scandal. In Matulich, S. & Currie, D. M. (Eds), Handbook of Frauds, Sacams and Swindles (1st Edition). Routledge.

[7]. Cao, D. (Dec 23, 2004). Costly lessons from the CAO scandal. China Daily, https: //www.chinadaily.com.cn/english/doc/2004-12/23/content_402605.htm

[8]. Burton, J. (Jun 3, 2005). CAO 'failed at every level, report concludes. Financial Times, https: //www.ft.com/content/05f6336c-d455-11d9-9db0-00000e2511c8

[9]. SASAC. (2018). What We Do. http: //en.sasac.gov.cn/2018/07/17/c_9258.htm

[10]. SEC. (2021). SEC Charges Ernst & Young, Three Audit Partners, and Former Public Company CAO with Audit Independence Misconduct, https: //www.sec.gov/news/press-release/2021-144

[11]. Wu, Y. (2018). Master's Degree (Dissertation, Harbin University of Commerce). https: //link.cnki.net/doi/10.27787/d.cnki.ghrbs.2018.000001doi: 10.27787/d.cnki.ghrbs.2018.000001

References

[1]. Li et al., 2007. Analyzing AVIC Oil from a Risk Management Perspective. 27.1: 23-32.

[2]. Lu et al., 2007. Reflection on "CAO" Incident Using the Behavioral Finance Theory.https: //www.semanticscholar.org/paper/Reflection-on-%22CAO%22-Incident-Using-the-Behavioral-Ai-ping/7011017d43c7ccd7d34bab5496e9f7a33a42f750#related-papers

[3]. Gong, 2015. Case Study of the AVIC Oil Incident.https: //xueshu.baidu.com/usercenter/paper/show?paperid=675520ed9637c3d1ed99a188ce0c8e47& site=xueshu-se& hitarticle=1

[4]. ChinaEconomyWebsite, 2005.https: //finance.ce.cn/stock/gsgdbd/202005/04/t20200504-34834012.shtml

[5]. Sina Finance, 2009. https: //finance.sina.com.cn/futuremarket

[6]. Jackson, K. T. (2009). The China Aviation Oil Scandal. In Matulich, S. & Currie, D. M. (Eds), Handbook of Frauds, Sacams and Swindles (1st Edition). Routledge.

[7]. Cao, D. (Dec 23, 2004). Costly lessons from the CAO scandal. China Daily, https: //www.chinadaily.com.cn/english/doc/2004-12/23/content_402605.htm

[8]. Burton, J. (Jun 3, 2005). CAO 'failed at every level, report concludes. Financial Times, https: //www.ft.com/content/05f6336c-d455-11d9-9db0-00000e2511c8

[9]. SASAC. (2018). What We Do. http: //en.sasac.gov.cn/2018/07/17/c_9258.htm

[10]. SEC. (2021). SEC Charges Ernst & Young, Three Audit Partners, and Former Public Company CAO with Audit Independence Misconduct, https: //www.sec.gov/news/press-release/2021-144

[11]. Wu, Y. (2018). Master's Degree (Dissertation, Harbin University of Commerce). https: //link.cnki.net/doi/10.27787/d.cnki.ghrbs.2018.000001doi: 10.27787/d.cnki.ghrbs.2018.000001

Cite this article

Ye,C.;Yuan,Z.;Wang,J.;Ping,J.;Wu,S. (2025). Risk Analysis and Risk Avoidance for Speculative Behavior in Futures Markets--Based on the AVIC Oil Incident and Related Case Studies. Advances in Economics, Management and Political Sciences,202,50-63.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of the 3rd International Conference on Financial Technology and Business Analysis

ISBN: 978-1-80590-263-8(Print) / 978-1-80590-264-5(Online)
Editor: Ursula Faura-Martínez
Conference website: https://2024.icftba.org/
Conference date: 13 June 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.202
ISSN: 2754-1169(Print) / 2754-1177(Online)

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