Analysis On Stock Index Futures And Determination Of The Arbitrage Time

Stock index futures(commonly referred to as index futures) is a standard futures contract for basic assets of stock price index.Buyers and sellers deal with the stock index price levels for a certain period behind.Stock index futures arbitrage contains Time present arbitrage,cross-period arbitrage, cross-species arbitrage and cross-market arbitrage.Time present arbitrage and cross-period arbitrage are the most common arbitrage.Time present arbitrage contains Forward arbitrage and Backward arbitrage.For time present arbitrage, the arbitrage boundary interval analysis,portfolio of index replication building strategies,futures and stock trading strategies and arbitrage arbitrage risk analysis are the key to success.Expected Theory and the cost of carry pricing models are the main methods,and the latter is more operational whereas it is quite different from the actual situation under its strict assumption.Taking taxes and market factors such as transaction costs into account,the pricing of stock index futures is analyzed based on the no-arbitrage pricing principle,and a stock index futures arbitrage in the upper and lower boundary is given.Arbitragers are generally used to hold the cost of carry pricing model to determine the time point.Because of the market status in the non-rational,the cost of carry based on arbitrage pricing model often faces the risk of spread continued to widen.In this paper,the confidence level is divided into the normal range and abnormal range according to the sample.When spread in the abnormal,it is considered as the opportunity to arbitrage.But this is not the best time to arbitrage.We also separately measure the spread to the favorable change and extent of the adverse.We estimate the value of profit and deterioration under a certain confidence level,and combined with the abnormal range of the border to determine the time of arbitrage.For traditional intertemporal stock-index arbitrage,it is necessary to predict the trend of different contract future maturity to set up arbitrage positions.Subjective factors play an important role in cross-period arbitrage,bringing a lot of risk in the trade.Cointegration test is to find the long-run equilibrium relationship between variables.Deviation from the,long-run equilibrium for short-term fluctuations in the introduction of error correction mechanism can well describe the variable balance between the short and long-term equilibrium relationship.By using Cointegration methods on analysis of futures contract price sequence in different months, we can get spread sequence or the distribution of residual sequence.Quantity model based on a rational choice sets up appropriate strategies to arbitrage in order to get rid of the traditional subjective expected future price changes in the direction of cross-phase high-risk arbitrage trading ideas and reduce the risk of spread to obtain a stable profit..Index based on the same subject or the subject of close related futures contracts exist a long-term equilibrium relationship between the price of futures contracts.Besides the contract spread due to factor of cost,there exits an unreasonable short-term price fluctuations. In the early time of 1980s,Cointegration proposed by Granger is the concept of non-stationary time series which deals with long-run equilibrium relationship.If we find a series of non-stationary after examation,and can eliminate its non-stationary through the differential,then the series of sequence is a single process.Cointegration analysis is aimed at non-stationary time series,especially single time series.Board and Sutcliffe(1996) did analysis on cross-market(Osaka,Singapore and Chicago) using the data of Nikkei 225 index.The study shows that there is room for arbitrage trading.While the study of Brenner,Subrahmanyam and Uno(1989) on the Japanese stock index futures market confirmed that rich income from arbitrage exists in the spread Nikkei stock index average of 50 contracts and Osaka,stock index futures contracts. However,the study of Butterworth and Holmes(1999) showed that the carry trade is loss deduction of transaction costs in the the FTSE100 and the FTSE 250 index futures market.Calendar spread trading is arbitrage transaction, but is not as intuitionistic as ETF arbitrage.The probability of observing spread arbitrage is very low compared with the latter two carry trade opportunities. The above study also shows that the market still exists intertemporal arbitrage trading opportunities even in the years after the introduction of stock index futures.In addition to the unilateral procedure similar to the period of ETF arbitrage and arbitrage,the core of intertemporal arbitrage is to find the exact timing and emerging probability of spread trading.Cointegiation methods provided appropriate strategies for institutional investors to build a different contract expiration month of the long-run equilibrium price sequence. We simulate the taiwan TX stock index future arbitrage,and get some result in the paper.