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A Research Into CSI300 Stock Index Future-spot Arbitrage Based On Threshold Co-integration

Posted on:2013-01-16Degree:MasterType:Thesis
Country:ChinaCandidate:L WangFull Text:PDF
GTID:2249330371479781Subject:Quantitative Economics
Abstract/Summary:PDF Full Text Request
Stock index futures are due for delivery in cash,to buy or sell the value of acertain number of Stock index futures contracts through pre-determined price and thematurity date. As one of the most important and successful financial derivatives, thestock index futures have been produced in the global financial reform in the 1980s.Proving by time, the existence of stock index futures has gradually become ahallmark of the mature financial markets, and investors usually use it to avoid thesystemic risk of the stock market. One of the most important features of stock indexfutures is arbitrage. Most of the studies focused on the mature stock index futuresmarket in addition to very few exceptions, so we might not know whether theempirical findings for mature markets also applied to emerging stock index futuresmarket. Therefore urgent research on future-spot arbitrage will be carried out in theemerging stock index futures market.The purpose of my article is to explore the arbitrage character between CSI 300stock index futures and stock index. In the theoretical section, the paper carried outthe classic literature review of domestic and foreign study. Then described the outlineof index arbitrage strategy、arbitrage pricing model、construction method of spotindex and other theoretical basis for arbitrage. In the empirical section, I use thresholdcointegration and some other methods to study the index arbitrage. Using themathematical calculation methods and threshold theory to determine the threshold,and further define the non-arbitrage boundaries, explore the cointegration effects ofindex arbitrage within three regimes. Put it in detail: in order to inspect the arbitragetrading between CSI 300 stock index futures and stock index, we need the datacointegration test, cointegration test between the CSI 300 stock index futures and theCSI 300 Index. We have already identified two threshold values,so we can arrange theoverall data into three regimes: upper regime as arbitrage band, middle regime as non-arbitrage band, lower regime as arbitrage band; At the same time we modelingthe ECM with CSI 300 stock index futures contract price and the stock index price forthe parameters estimation; Followed by the modeling of the GARCH equation toexplain the volatility spillover effect between the current volatility of the price ofstock index futures and index futures and spot.The conclusion section includes the following content: CSI 300 stock indexfutures and spot arbitrage feasibility analysis; determination of the non-arbitrageboundaries; the lead-lag relationships and volatility spillover effects between CSI 300index futures and spot prices. Specific to the actual operation, if the stock indexfutures price is higher than the upper limit of non-arbitrage band, investors will beable to perform the forward arbitrage (short arbitrage) operation to gain profits,perform the reverse operation until the settlement date. If the futures price is belowthe lower limit of the non-arbitrage band, investors can use the reverse arbitrage (longarbitrage) operation to gain profits, which is contrary to the forward arbitrageoperations in both markets.
Keywords/Search Tags:CSI 300 stock index futures, Future-Spot arbitrage, Threshold Cointegration, Non-arbitrage band, Volatility Spillover effects
PDF Full Text Request
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