On China's Stock Index Futures In The Necessity Of The Idea

Stock index futures is an instrument for risk management in international capital market. After several years development in China's capital market, the stock index futures is also needed by Chinese investors. The business scale of securities companies, close-ended funds, open-ended funds, social security funds and other institutional investors have expanded rapidly with an increased systemic risk of stock market. But how to hedge systemic risk in China's stock market is gradually being concerned by investors. Especially since June, 2001, the Shanghai and Shenzhen composite stock indices had fallen by 40 percent for successive seven months, resulting in huge losses to investors. Academics and investors have called for a launch of stock index futures trading. Officials from China Securities Regulatory Commission and Shanghai Stock Exchange also reiterated that a national unified stock index and stock index futures will be launched as soon as possible.The following dissertation sums up fundamental principles of stock index futures trading in advanced countries with a great deal of interrelated books and figures for reference. It introduces current situations of China's securities markets and analyzes functions of stock index futures to China's economy. It also discusses the feasibility and necessity for developing stock index futures trading in China. A model for stock index futures trading in China is designed and risk management reassures are illustrated. It emphasizes the necessity for launching stock index futures trading in China, functions to China's economy and the model for stock index futures. The dissertation concludes that it is necessary and feasible for China to launch stock index futures trading although the new trading product may bring other risks. It says that the derivative product should be designed and introduced based on China's actual conditions. It advises that a national unified stock index should be introduced firstly. Then stock index futures trading will be launched after the index is accepted by investors.