Stock Index Futures Hedging Model

The stock price index futures is called" a revolution of the stock market ","the most exciting financial innovation" since its launched to the market on 1982. Now index futures is widely acknowledged as one of the most effective tool of eliminating system risk of stock market. After experiencing born period, growth period, stagnation period and prosperity period for 25 years, index futures has already become one of the most successful futures products in international futures market. Meanwhile, the index futures hedge theory has also get a further development, which evolves from traditional hedge theory, the selectivity hedge theory and modern hedge theories. After analyzing the merits and shortcomings of the three theories, the paper mainly studies four minimum square hedge theory models, which are The traditional static OLS model, VECM model, one variable GARCH(1, 1) model and one variable GJR-GARCH(1, 1, 1) model. Established on September 8th in 2006, China Financial Futures Exchange initiated a new era of our country finance ramification-- index futures, opening a door for the China futures industry. Through examining advantage and research results of the foreign hedge theories and comparing with domestic and international three index futures, which are S&P 500 and its index futures, Hongkong HIS and index futures, Korean KOSPI 200 and its index futures, the paper computed the optimal accurate dynamic hedge ratios of four kinds of models and analyze hedging performance of each model. It also draws a conclusion and makes recommendations for hedging operation in domestic market.