The Optimal Hedging Strategy For Stock Index Futures And Its Efficiency

The stock index futures is a kind of financial derivative product based on the stock index. As one of the efficient instruments for the hedging of spot securities investment, the stock index futures can reduce the systematic risks of the capital market, playing an important role in the investment portfolio and risk management. The stock index futures is a fresh financial instrument now and the only one of China, the CSI300 stock index futures is still traded in simulation. However, with the development of China's capital market, there is no doubt that the stock index futures is to be developed in the near future. Focusing on the hedge function of the stock index futures, this paper analyzes the optimal hedging strategy and its efficiency in theory and calculates the optimal hedging ratio and its efficiency indicator with the high frequency data of CSI300 futures.This paper consists of 6 chapters. The 1^st chapter is the introduction, mainly talking about the research background, literature review and research framework. In the 2^nd Chapter, we review the origin and current market development of the stock index futures, especially introducing the histories and current situations of the stock index futures markets in China mainland, the Hong Kong SAR and the Taiwan province of China. From the view of financial engineering, the 3^rd chapter is to analyze the principal and trading strategy of hedge function of the stock index futures, and we analyze the determination of the optimal hedging ratio and the measuring of the ratio's efficiency with the popular models of OLS, VAR, ECM and GARCH. Based on the theories and models in the 3^rd chapter, the 4^th chapter calculates the optimal hedging ratio and its efficiency indicator of CSI300 futures stimulant trading with the high frequency(daily) data since 30^th, October, 2006, and compares the differences of the results based on the above 4 models as well as the reasons of them. In the 5^th chapter, we refer to the hedge strategies and operation methods for the institution investors to use the stock index futures from the standpoints of the index fund. At the end of this paper, the 6^th chapter discusses the feasibility of carrying out of the stock index futures at the current situation of China's capital market and gives some advice on the policy making.