A Study On Macroeconomic Impact On The Return Volatility Of Derivative In Chinese And American Market

With the development of financial derivatives,the financial derivatives market has become an essential financial market.According to the Bank for International Settlements,the turnover of the financial derivatives market reaches 595 trillion.The fast development of the financial market makes the investors and hedgers realize the importance of the financial derivatives mar-ket.More and more investors employ derivatives to hedge and invest.In the year of 2008,the Subprime mortgage crisis caused by the credit default swap outbroke,leading to mortgage delinquencies,foreclosures,and the devaluation of housing-related securities.The investors and policy-makers start to pay attention to the return of the derivatives.Many researchers begin to investigate which macroeconomic factors affect the return of derivatives.The macroeconomic data is low-frequency data such as monthly data,while the return of the derivatives data is high-frequency data such as daily data.The research employs the Mixed-data Sampling model proposed by Ghysels et al.（2002）^[226],Ghysels et al.（2006）^[97],and Andreous et al.（2010）^[8].We focus on the futures market and the variance swap market,testing the influential macroeconomic factors in these two markets.Our study is based on the Mixed-data Sampling（MIDAS）model.In the study,we use the method of the financial-economic,financial time series,and econometrics.The thesis explores how the macroeconomics variables infect the derivatives return.The main work of the research is as below:First,we employ the variants of the MIDAS model-the the GARCH-MIDAS model to link the low-frequency macroeconomic time series and the high-frequency futures returns data.The macroeconomic data is released monthly,quarterly,and yearly,while the futures return data is daily.The GARCH-MIDAS model can link the time series data with different frequencies.In the research,the long-run variance of futures return is decided by the MIDAS filter.The short-run variance of the futures return is decided by the GARCH（1,1）process.The research illustrates the relationship between macroeconomic fundamentals and futures returns.Second,we employ the GARCH-MIDAS model to test the relationship between the macroeconomic fundamentals and the American commodity futures market.In the research,we employ the CPI,PPI,M2,interest rate,and real interest as the macroeconomic variables.Test the relationship between the monthly macroeconomic variables and the daily American commodity returns.In the research,we compare the empirical results of the Chinese and Amer-ican commodity futures returns.The comparison results illustrate the differences between the two commodity futures markets.Third,we employ the GARCH-MIDAS model to test the relationship between the long-run variance of Chinese index financial derivatives and the macroeconomic variables.As the development of the Chinese index financial derivatives is not so long,we employ the CSI 300futures.The underlying of the CSI300 futures is the CSI 300 index,which is a capitalization-weighted stock market index designed to replicate the performance of the top 300 stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.The empirical results illustrate that the inflation index-CPI and PPI have a different impact on the volatility of the CSI300 futures return.The impact of the interest rate and the real interest is different.Last,we calculate the variance risk premium with different maturities.In the research,we employ the’model-free’method to calculate the implied variance of the option.The variance risk premium with the different maturities is the difference of implied variance and realized variance with different maturities,which is a measure of variance swap’s return.We employ the ADL-MIDAS model and the variance swap’s return to forecast the expected return of the underlying asset,to have a better understanding of variance swap’s return.We also use the GARCH-MIDAS model to test the relationship between the return of the variance risk premium and macroeconomic factors.From the empirical results,we can know:Firstly,the macroeconomic factors have different impacts on the volatility of the Chinese commodity futures’return.In China futures market,the gain in the inflation index increases the volatility of futures’return in the Chinses commodity futures market.The monetary policy has different influences on the volatility of the Chinese commodity futures’return.Secondly,the macroeconomic factors have different impacts on the volatility of the Amer-ican commodity futures’return.The rise in the inflation index-CPI and PPI leads to the increase of the return volatility of copper futures,corn futures,gold futures,and soybean futures,while the rise of the inflation index decreases the return volatility of sugar futures in the American futures market.Thirdly,the inflation indexes have different influences on the return volatility of stock index derivatives-CSI 300 futures.The increase in CPI will raise the return volatility of CSI300 futures,while the rise of PPI has the opposite impact.The most noteworthy empirical results are the one-year interest rate,and the real interest rate has a different effect on the return volatility of the CSI 300 futures in the Chinese financial derivatives market.Last,the rise in the inflation index and federal interest rate increase the return volatility of Standard Poor 500 variance swap return,while the increase in the real interest rate and M2 will decrease the return volatility of Standard Poor 500 variance swap return.Comparing with the empirical results of CSI 300 futures,we can know the inflation index and monetary policy have a different impact on the Chinese and American financial derivatives market.The moderately easy monetary policy will increase the return volatility of the Standard Poor 500 variance swap contract,while the impact of monetary policy is not evident in the CSI 300 futures market.The research has significant meaning in three aspects.First of all,this research is an es-sential supplement of Chinese derivatives’research.The recent research focuses on the impact of the single macroeconomic factor on the Chinese derivatives market.Our thesis provides a comprehensive study of the macroeconomic effects on the Chinese derivatives market.Second,our research provides a comparative study of the Chinese derivatives and American derivatives market.The American futures market has a leading role in the World derivatives market.In 2018,American derivatives market sold 0.455 billion futures contracts,which takes up the 55%percent of the allover derivatives market.The comparative study answer the essential question of the Chinese futures market.Last but not least,the thesis provides a supplement of the Chinses derivative market.The empirical results of the study provide essential support for policy-makers and investors.Based on the research,we make countermeasures and suggestions for the China futures market.First,make the related laws for the Chinese futures market.Second,construct the rules for the Chinses derivatives market.Third,improve the derivatives pricing level of the financial industry.Last,promote the transmission of monetary policy.