A Research On CST300Stock Index Futures Hedging Risk

The CSI300stock index future was listed for more than two years. It’s trading volumeand the dramatic amplitude has greatly exceeded the expected effects, and the tide whichstock index future leading is all over the broader market, as well as all the commodityfuture becomes increasingly apparent. The value discovery and hedging which are as thetwo basic functions of the stock index future have been paid more and more attention by thefinancial industry. As the driving force of the future, hedging is the primary way to avoidsystemic risk for fund brokerage. However, the end result of hedging does not transfereethe risk fully out of the invention. It is the hedging that using less basic risk of the changesinstead of the higher risk of price changes. Therefore, the risk of hedging impacts on theeffect of hedging directly. Take stock index futures for example, it is particularly importantto make investors understand the risk of hedging for the stock index futures directly. In thisway, the investors can scientifically manage the risk.This article which is based on the above reasons takes the CSI300stock index futurehedging for example, and the order of the article is in accordance with risk identification,risk measurement, and the risk management. The passage emphasizes on the idea of thebasis risk and cross-risk in the future hedging. Basis risk analysis includes the size and theinfluence factors of the basis risk. Use the way to quantify the basis risk of China’s CSI300stock index future hedging. And the cross-risk analysis related to the selection of theportfolio. So that the investors can get a more in depth and systematic understanding of thehedging risk in the China’s stock index future, and only in this way, we can cause andstrengthen the investors’ emphasis on the risk of stock index future hedging. Finally, thepassage gives the participants of China’s stock index future hedging the measures andmethods to reduce the risk in hedging. And we strive to guide actual activities of theinvestors in the investment of stock index futures hedging. The specific ideas are asfollows: Chapter I is to describe the significance of the topic of the article, the background,literature review, research ideas, research methods, the possibility of innovation anddisadvantage. This part is divided into three parts. In the first part, it introduces thenecessity and the reasons of the stock index future market and hedging. The second partshows that the risk still exists in stock index future hedging process. Finally, domestic andforeign stock index future hedging theory and risk theory are reviewed. In terms ofhedging’ research, relative to foreign scholars, domestic scholars focus on the use ofmathematics to quantify the hedge ratio and other issues; on the aspect of risk, foreign riskresearch for future market is much more and more systematic comparing with the scholars’research in domestic which is relatively less systematic. We can see from that, the researchin domestic is not mature enough either in the part of hedging nor in the aspect of risk.Chapter II introduces the risk to the reader in order for the investor to get a morein-depth understanding of the risk. It is using to introduce the risk of CSI300stock indexfuture hedging. This part can be divided into two parts. The first part shows the definitionof risk and the reasons that risk exits in the future market. The second part introduces therisk of the future market. And the second part includes the usual risk in the future marketand the special risk in the stock index future market. And it presents the basis risk andcross-hedging risk separately which is unique risk of the stock index futures.Chapter III identifies the basis risk and the cross-hedging risk. This chapter iscombined with two parts. In the first part, the theory of the basis risk and cross-hedging riskis introduced including the method of VaR and the portfolio theory. In the second part, weuse the empirical analysis to analyze the basis risk of China’s CSI300stock index futurehedging. The part is in the order of the theoretical introduction, the model derivation, dataselection and empirical analysis to research and quantify the basis risk.Chapter IV is used to propose measures and recommendations of avoiding the risk infuture hedging. And It at the same time researches the optimal hedge ratio which is as anecessary supplement of cross-hedging risk. The measures are including three aspects: first of all, the investors their selves’ risk has to be controlled. Secondly, the future companiesmust control their risk. Thirdly, The Future Industry Association must bear theresponsibilities. At last, the ways of how to calculate the hedging ratio are introduced as annecessary supplement of the article.In chapter V, the comprehensive analysis idea and corresponding conclusions arelisted. At last, the comprehensive description of the findings in the empirical research andmajor recommendations can be seen. At the same time the last areas for further research aredescribed in this part.