The Research Of Stock Index Futures' Risk Management And Circuit Breaker System In China

As a stock index derivative, the first stock index future was born in the Kansas City Board of Trade (KCBT) in United States, on February 24, 1982. The contract was known as the Kansas City Value Line Index Future (KCVLIF). Since then, the stock index futures have developed quickly in the world. Exchanges of many countries have introduced various contracts of stock index futures. Nowadays stock index futures have become one of the most active financial derivatives on the global market.At present, the CSRC and other departments are also actively preparing to introduce stock index futures into Chinese market in order to change the current condition that there's no risk management tool in the market and provide new options of risk management and asset allocation for investors. The introduction of stock index futures will rich the products in the market and will do well to the operation of capital market. But stock index futures will also bring some risks, so the risk management of stock index futures will be very important and the risk management by the Exchange will be the core of market risk management.Now the CFFE has introduced a circuit breaker system into the risk management of stock index futures. The system sets up a critical price for each contract, so the transaction should be done in the range of the price. Therefore, as an integral part of risk management, it is necessary for the circuit breaker system to be studied as a topic in order to do well to the stable operation and long-term development of the stock index futures market.This paper can be divided into the following sections. The first part is the overview of international studies on the circuit breaker system. The second part is the specific analysis on the risks of stock index futures, including the type and the management of these risks. The third part is the introduction of circuit breaker system's history, functions, other countries' practical experience, rules, settings and effects. The final part is the analysis and evaluation of the domestic circuit breaker system based on the stock index data, followed by some rational suggestions. The paper uses methods of theory, empirical and other analysis for the study.