1. Introduction

Luxury jewelry futures were issued for several reasons. Firstly, investors are looking for diversified investment options and wish to obtain a higher rate of return on their investment in luxury jewelry. The launch of luxury jewelry futures provides a way for these investors to participate in the luxury goods market by trading luxury goods futures contracts in the futures market and deriving investment returns from them. According to S. V. Le in "International Investment Diversification Before and After the October 19, 1987 Stock Market Crisis" published in the JOURNAL OF BUSINESS RESEARCH in 1991, diversification in investment is crucial for reducing risk and enhancing returns, especially in volatile markets like luxury goods [1].

Secondly, the luxury jewelry market is characterized by high price volatility, and investors may be exposed to higher market risk. Therefore, the issuance of luxury jewelry futures can help investors to hedge against the risk of price volatility of luxury goods through the futures market, thereby lowering the overall level of risk of their investment portfolios. This concept aligns with the findings of Evan Gatev and Philip E. Strahan in their work "Banks' Advantage in Hedging Liquidity Risk: Theory and Evidence from The Commercial Paper Market," which highlights the significance of hedging in managing liquidity risk in volatile markets [2].

In addition, the luxury jewelry market is usually relatively small and illiquid, resulting in a lack of flexibility in trading luxury goods. The issuance of luxury jewelry futures can increase the liquidity of the market, making it easier for investors to enter and exit the market and discover market prices. Vivian W. Fang, Thomas H. Noe, and Sheri Tice discuss in "Stock Market Liquidity and Firm Value" how increased market liquidity is associated with higher firm value, underscoring the importance of liquidity in trading environments.

Finally, trading luxury jewelry futures can promote price discovery and transparency in the luxury goods market. Through futures trading, market participants can get a clearer picture of the market price of luxury goods, and thus more accurately assess the value of luxury goods and market trends. This notion is supported by the work of Byoungho Ellie Jin and Daeun Chloe Shin in "Will You Stay the Same? Examining Customer Reactions to Acquisitions," where they emphasize the role of market transparency in customer perceptions and market stability, especially during times of significant market changes like acquisitions [3].

2. Publishing Location

Luxury jewelry futures are usually released on financial market exchanges or electronic trading platforms. Exchanges like the Chicago Mercantile Exchange (CME) or the New York Mercantile Exchange (NYMEX) may offer futures contracts on luxury jewelry [4]. (These exchanges are among the leading futures exchanges worldwide, offering a wide variety of futures contracts, including commodities, financial derivatives, and possibly luxury jewelry futures contracts.)

3. Index Determination and Criteria, Pricing Criteria

The components of the index should cover a wide range of luxury accessory categories, such as high-end handbags, jewelry, watches, etc., to ensure that the index is representative. When selecting specific brands and product models, factors such as market demand, brand awareness and product popularity should be considered. Secondly, factors such as quality, craftsmanship, brand reputation and scarcity of materials should be taken into account, as they directly affect the value of luxury jewelry [5].

The quality and craftsmanship of luxury jewelry will directly affect its price. Brand reputation, scarcity of materials, production process, etc. will affect the value of luxury jewelry. Secondly, market demand and supply are also important factors affecting the price of luxury jewelry. If a certain luxury jewelry brand or product model is in short supply, the price may rise; and vice versa. In addition, macroeconomic factors, exchange rate changes, etc. may have an impact on the price of luxury jewelry.

Futures delivery method: mixed delivery. Trading parties can choose cash delivery or physical delivery, according to their respective needs and circumstances for the delivery method.

4. Buyers and Sellers

Buyers: 30seller (of goods). Speculators play a critical role in the luxury jewelry futures market. They are investors who aim to capitalize on short-term market fluctuations for profit. By purchasing futures contracts on luxury jewelry, speculators bet on the appreciation of these assets, with plans to sell the contracts at a higher price in the future as the market value of luxury jewelry increases. This group of investors is particularly attuned to market dynamics and price volatility, and their trading activities contribute significantly to market liquidity and overall trading volume. Their speculative actions can lead to increased price discovery and may even help stabilize market prices over time by providing additional buying and selling opportunities [6].

Luxury retailers and wholesalers, on the other hand, engage in the luxury jewelry futures market primarily for risk management purposes. These market participants are directly affected by fluctuations in the prices of luxury jewelry, which can impact inventory costs and profit margins. By securing futures contracts, they can lock in the future purchase prices of luxury jewelry, thus ensuring more predictable inventory costs and safeguarding their profit margins against adverse price movements. This hedging strategy allows them to plan their business operations more effectively, reducing the financial uncertainties associated with price volatility in the luxury jewelry market.

Luxury goods producers, including artisans and manufacturing firms, also participate in the luxury jewelry futures market. They utilize futures contracts to secure future sales prices, mitigating risks associated with raw material cost fluctuations and uncertain market demand. By locking in prices through futures contracts, producers can guarantee that the luxury items they create will be sold at a price that ensures profitability. This hedging mechanism is crucial for maintaining stable production schedules and investment in quality craftsmanship, especially in an industry where the cost of raw materials like precious metals and gemstones can be highly volatile [7].

Investment funds and institutional investors, such as pension funds, endowments, and insurance companies, may incorporate luxury jewelry futures into their investment portfolios to enhance diversification and potential returns. For these investors, luxury jewelry futures represent an alternative investment class that can provide a hedge against inflation and currency risks, while also offering the potential for capital appreciation. By including luxury jewelry futures in their asset allocation strategies, these investors aim to achieve a balanced portfolio with reduced overall risk and improved long-term growth prospects. This strategic approach to portfolio management underscores the growing recognition of luxury jewelry futures as a viable and valuable component of comprehensive investment strategies [8].

5. Limitations

Luxury jewelry futures as a kind of financial derivative, although to a certain extent for investors to provide diversified investment options, but it also has some limitations. First of all, the luxury jewelry futures market is still relatively new compared to the traditional financial market, the market size is relatively small, and the liquidity is insufficient. Due to the characteristics of the luxury jewelry market itself and the limitations of the trading scale, the liquidity of luxury jewelry futures may be limited to a certain extent, resulting in trading difficulties and price volatility. Secondly, the value assessment of luxury jewelry is subjective and complex. The price of luxury jewelry is often affected by a variety of factors such as brand, material, craftsmanship, history and culture, etc. Therefore, it may be difficult to determine the pricing standards and valuation methods for luxury jewelry futures, which also increases investors' uncertainty in the market. In addition, the luxury jewelry market is characterized by high price volatility and high market risk. Prices of luxury jewelry are affected by factors such as fashion trends, the economic environment and consumer preferences, and may fluctuate significantly, which poses a higher investment risk to investors, especially for short-term speculators, for whom market fluctuations may result in higher losses. In addition, the problem of information asymmetry in the luxury jewelry futures market is also one of the challenges it faces. Information in the luxury jewelry market may not be sufficiently transparent and some key information may be limited to a small number of market participants, which may lead to an unfair and non-transparent market and put some investors at a disadvantage. In summary, although the luxury jewelry futures market provides investors with a way to participate in the luxury goods market, it still faces limitations such as illiquidity, pricing difficulties, high market risk and information asymmetry. Investors need to carefully assess the market situation and formulate appropriate investment strategies when participating in luxury jewelry futures trading to minimize risks and obtain sound investment returns.

6. Conclusion

In conclusion, this paper has examined the emergence of luxury jewelry futures, highlighting their significance in providing investors with diversified investment opportunities and avenues for risk management in the luxury goods market. The issuance of luxury jewelry futures offers benefits such as increased market liquidity, price discovery, and hedging against market volatility. However, several limitations exist, including the relatively small market size, liquidity constraints, subjective pricing mechanisms, and information asymmetry. To address these shortcomings, future research could focus on developing more robust pricing models for luxury jewelry futures, enhancing market transparency, and exploring innovative strategies for risk mitigation. Additionally, further investigations could delve into the long-term performance and stability of luxury jewelry futures as an investment vehicle, as well as their potential impact on the broader financial markets. Overall, by addressing these areas of concern and expanding the scope of research, the field can advance understanding and facilitate more informed decision-making for investors in the luxury goods sector.