| The Stock Index Futures is one of financial derivatives investment tools. It is based on Stock Price Index for transactions. Buyers and sellers agree to a specific time and price in the future when the transaction is made. Stock Index Futures started relatively late in mainland, but it goes on. After much exploration and efforts through years, The Stock Index Futures is officially launched in China Financial Futures Exchange on April 16,2010. Shanghai-Shenzhen 300 Stock Index Futures contract become the first stock index of class financial derivatives in mainland China capital market.Stock Index Futures have more than three functions:hedging, arbitrage, price discovery and so on, most scholars pay more attention to hedging. Arbitrage has stronger practical significance, so I mainly introduce the arbitrage in this paper. The basic practice of the arbitrage is to buy (sell) some stock index futures contract, at the same time, sell (buy) the related another contract (Futures-Stock Arbitrage refers to stock combination), and two contracts will also be liquidated in a certain time, we can count out the price spread to earn low risk deviate profits. The arbitrage mainly includes Calendar Spread Arbitrage, Inter-market Arbitrage, Inter-commodity Arbitrage and Index Arbitrage.The author focuses on Futures-Stock Arbitrage, because Futures-Stock Arbitrage is helpful to decrease the risk before closing on the last trading day. Throughout the researches of predecessors, they pay more attention to Futures-Stock Arbitrage no-arbitrage interval research in different conditions, how to choose stocks for Index Replication and make the minimum tracking error are very key. Investors prefer to the maximize profits. According to the characteristics of the two markets, they are hot loyal to Futures-Stock Arbitrage. And now the profits are directly related to the proportion of the two sides, if we establish two contrary positions, and greatly reduce investment risks, while on the other side there is the profits, generally the opposite side there is losses, the minus is very useful. How to make out the optimal balance between the best return and risk is the key to success of Futures-Stock Arbitrage. The investors must reasonably make out the optimal Futures-Stock Arbitrage ratio before the arbitrage requirements in the maximize utility, and make the risk in control, or minimize variance and expect the earnings. This is the problem of the optimal ratio of Index Arbitrage.This paper bases on the previous studies, and the author uses the Mean-Variance utility function and expects the maximum returns, giving the certain risks. Finally the author begins to the ratio of Index Arbitrage Mathematical deduction, and give out the Mathematical expression. It is ready for the empirical analysis.When Index Arbitrage is in force, we choose the Index Stock, normally Shanghai-Shenzhen 300 is used to copy, completely copy. But the number of the component is very many, the costs are too much larger, I can not get the satisfactory results. The author finally chooses ETFS as Stocks combination, mainly because of the lower costs, and ETF is similar to The Stock Index Futures. There is not ETF which covers the two markets and can not appear in short time. In order to make the ETF typical and feasible, I choose a variety of ETFS as Stocks combination, because very few funds can replace a lot of shares to get the goal, reducing the cost. Choosing the ETFS, I pay more attention to the price relativity, the ratio of return correlation, the minimum tracking error.Finally the author uses the transaction data of The Shanghai-Shenzhen 300 Stock Index Futures IF1103 between July19.2010 and March 18.2011, using dual variable vector auto-regressive model, and dual variable integration model to test. The point shows the second method is the optimal. In the end, the author begins to Index Arbitrage using ETFS and Stock Index Futures, the arbitrage works well. |
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