Equity Funds Use Of Stock Index Futures Hedging Function Related Issues

On April16,2010, China Financial Futures Exchange launched the CSI300stock index futures, which undoubtedly is a major event for China’s capital market. Stock index future is a financial derivative product which is designed specifically for the management of systemic risk of the stock market. In1981, the Kansas Futures Exchange launched the first stock index futures in the world, after30years of development, it has gradually become the most popular and the most dynamic hedging instruments in the financial markets. This is not only due to the superiority of the stock index futures, but also the stock index futures combination of a large number of scholars and staff’s research and practice."Stones from other hills may serve to polish jade", equity fund is the representative institutional investor in China’s stock market, and how to effectively use foreign mature markets hedging theory and practice is more necessary and urgent. Based on the characteristics of China’s capital market, the risk about funds use stock index futures to hedge is special, and the special risk of the Fund can not be avoided in hedging.This study includes the following content. Firstly, this paper briefly introduces the concepts and theories about stock index futures and hedging, and on this basis, discusses the influences about equity funds asset management, portfolio, fund style and internal risk control after the introduction of stock index futures. Second, combined with the existing conditions and regulations of China’s stock market and stock index futures market, research and discussion the problems in China equity funds use stock index futures hedging. For example, when the fund in our country carries out hedging, it will face the single problem of the stock index futures products. In order to solve this problem, this paper uses empirical methods to establish the number of hedging subject matter, and empirical analysis of hedge fund portfolio. The another problem in our stock index futures market is there are some rules limit when the hedging of the Fund, so, this paper combine with the Securities investment Fund guidelines to analyze the hedge ways which the equity funds make use of the CSI300stock index futures under this regulation, and study the risk when the fund carry out hedging. In addition, the article discusses the basis risk, liquidity risk which the funds faced when hedging. Finally, this paper presents the strategies which the equity funds use stock index futures to hedge, in order to make contribution for the development of China’s fund industry.