A Study About Risk Measure And Supervision Of Stock Index Futures

After 25 years' development, stock index futures have become one of the mostsuccessful varieties of the futures in the international futures market. Stock indexfutures have functioned tremendously in avoiding systematic risks and promoting thedevelopment of the securities market since Kansas City Futures Exchange (KCBT) inthe United States put forward the Kansas Value Line index futures. However, as atrading mechanism features, stock index futures have their own risks. It is quitepossible to cause the investors huge losses once the stock index futures are operatedand managed improperly. It is even worse that the improper operation andmanagement will make the country's finance out of order. Based on the riskcalculations of stock index futures, the thesis will launch a series of the theoreticaland empirical researches as well as some individual proposals concerning the legalsupervision of the stock index futures exchange and the mature of the legislation inChina's stock index futures.With the accession to the WTO, China entered the integration of the globaleconomy era at the very moment. Since then, we have to conduct the research oneconomic issues from the global perspective. What we can do now is to consider howto open the financial market effectively taking the integration of China intoconsideration. We must act cautiously with the capital account liberalization becauseit is often the fundamental reason of the financial crisis. The essence of the capitalaccount liberalization is to connect the domestic economy with the internationalcommunity. Meanwhile, it has the possibility that an open external to the socialwelfare will counteract each other then trigger a financial crisis during the process toreprice the domestic financial assets. Therefore, whatever financial issues we examine,should not be separated from the large international context, the study is noexception.Main contents of the chapters are as follows:Chapter 1 has analyzed the background and significance of the thesis, and defined some basic concepts, and concluded the outline, methods, framework,difficulties and innovations of the thesis.Chapter 2 is the overview of the theoretical literatures. First it recalled thedefects of the Efficient Market Hypothesis, the selection and development of thebehavioral finance, BAPM pricing theory and BPT portfolio theory. Second itintroduced the latest development of the theoretical risk calculations which includesfractal market theory, Copula theory and high-efficiency financial time seriesapproach to study. Next it introduced the content of risk-management techniques, thenecessity of the integrated management with the VAR structure of the report. Then itfocuses on the eternal environment of the stock index future market from theliberalization of the financial perspective of international norms with Chinesecharacteristics. At last, it comes the overview of the supervision theory as well as thecomparison and evaluation among the public theory, the capture theory and the newsystem theory.Chapter 3 of the thesis is the source of stock index futures market and its riskwith the content of its classification. The concept of the stock index futures and therelated pricing were firstly put forward. The source and classification of the stockindex futures were discussed following. Second, the chapter analyzed thepsychological factors in the exchange of stock index futures. Based on thepsychological factors, the thesis put forward that pitfalls lead to common deviantbehavior. It is the misbehaved trading operation that results in the risk. Then theexpectations theory and the content of cognitive errors during the decision-making,judgment and transaction were introduced. Finally, the empirical research such as thesurvey concerning the investment psychology in the decision-making, judgment andtransaction was carried through. It turns out that the phenomena distributed widely inwestern stock markets that Chinese security market also has mostly existed. How toavoid investment psychology of error of self-defeat is the dream of the every investorrealm. Therefore, the investment psychology of empirical investigation willcontribute to the risk analysis and risk prevention for the capital market.Chapter 4 mainly discussed the risk measure and evaluation of the stock indexfutm'es. It begins with the introduction of sixth methods to calculate and evaluate the risk followed by the brief review of the liquidity risk and operational risk. Severalindicators of measuring and calculating such as width, depth, immediacy andflexibility have also mentioned in this chapter. Again, the meaning and procedures ofthe risk management has been referred. This chapter ended with the empirical studythat aims at a variety of global stock index futures contracts taking advantage of theVaR model and CVaR model. The study verified that the VaR value is oftenunderestimated by using the traditional normal fractal method. CVaR value is fargreater than the normal calculation than the VaR value under the 99.9% confidencelevel.Chapter 5 start the study against the volatility of the stock index futures. It firstintroduces the general characteristics and the measurement of the volatility in stockindex futures. After that, the ARCH&GARCH models are brought in. The lattermodel has been used to reflect the relations between the stock reward rate and thefluctuation of the stock index futures. Furthermore, according to large volume of theevery country's stock index futures market, another empirical analysis is done bycomparing the GARCH model with SV model. It shows that the depict ability of SVmodel is excel in GARCH model regarding the time and order perspectives. The lasttopic of this chapter is market mechanism and economic meaning of the continualvolatility of the stock index futures. It will help the analysis of the risk and researchof the prevention strategy of the stock index futures.Chapter 6 puts up the main content of the supervision of the stock index futures.The nature, necessity, objectives and principles of the supervision of the stock indexfutures consisting of the content firstly to be introduced. This was followed by thebrief introduction of the current conditions and defects of the law regulating system inChinese stock index futures market. The chapter ends with some proposals to perfectthe legislation of Chinese stock index futures. The first proposal is that the futurescrime should be distinguished from the security crime and should be separately listedcorresponding to the provisions. The second one is that the criminal forfeiture ofproperty should be introduced into the property punishment and the rate of criminalfine should be adjusted. The last is that some certain futures crimes are applicable forthe statutory maximum penalty to life imprisonment. Chapter 7 is the overview and outlook of the whole thesis.