Calculation Of CSI300Index Futures’ Optimal Hedging

As a type of futures trading, the stock index futures trading and commoncommodity futures trading has the same basic characteristics and process. Stock indexfutures is a investment tool as leverage, if we have a correct judge we can get a highincome, investors use it to manage the stock portfolio, which prevent systemic risk (weusually say grail risk), or get no risking return by arbitrage.Hedging is the root of futures, the strategy of hedging is also one of the mostfundamental strategy of stock index futures, after hedging of stock index futures tradingand the certain stock spot combination, we can circumvent the price risk of cash market.If the futures position and spot have a well match, then the hedging can eliminate themost systemic risk of spot market. But the key of stock index futures is to identify thehedging ratio. Research of the optimal hedging rate has two kinds, one is the risk-minimizing hedging ratio, another is the utility-maximizing hedging ratio. The modelto estimate the hedging ratio is as follows, OLS model, VAR model, ECM model,GARCH model and ECM-GARCH model.After three years of simulating, China’s stock index futures officially listed tradingat April16,2010. In this paper, we use the software of Eviews5.0to estimate the risk-minimizing hedging ratio by ECM-GARCH model and the utility-maximizing hedgingratio by Mean-Variance model which all based on the actual transaction data of CSI300index futures. We found that both in the sample of in or outside, the risk-minimizinghedging ratio is higher than the utility-maximizing hedging ratio.