Csi 300 Futures Launched On The Spot Market Volatility

This paper aims to examine the impact on the spot price volatility of the underlying stock market after the introduction of stock index futures. I study the example of the Korean financial markets, as it has much comparability with the situation in our country. By quoting the historical data from 1990 to 2006,I construct a GARCH model with a dummy variable, which stands for the influence on the volatility of the stock market after the introduction of the KOSPI 200 index futures.The empirical finding suggests that the introduction of KOSPI 200 index futures brings greater spot price volatility in the underlying stock market. I also try to give the reason why this impact happens by analyzing the Korean economic environment during the short period before and after the introduction of KOSPI 200 index futures.The stock index futures would be introduced in our country in very short time, it will have much influence on the stock market and the economical operation. The introduction of the Shanghai and Shenzhen 300 Index futures will have little impact on the volatility of the stock market for the long run. However, it may significantly affect the short-time trend of the stock market, and magnify the spot price volatility of the underlying stock market.