Along with the development of China’s capital market and the urgent needs of risk-aversion investors, China’s HS300stock index futures contract officially launched at the Shanghai Futures Exchange on April16,2010. As the scholar Jian Jun Describes in his book 《stock index futures》,"the introduction of stock index futures, a small step of financial futures market, but a big step of China’s capital market", during the past two years,the stock index futures market as a whole has shown a good momentum of development such as the increasing of turnover volume and transaction income, the continuous expanding of market funds and the improving of market liquidity. Its introduction not only provides effective financial risk management tools for China’s capital market, but more importantly also provides the market with new market function of hedging, speculation and arbitrage. Especially in the first years of stock index futures’recent launch, the market is not mature enough, so at this time if the investors are able to use reasonable arbitrage strategy to accurately seize arbitrage opportunities, they will be able to get more riskless spreads income. Therefore, research on China’s stock index futures market arbitrage opportunities and arbitrage model has very important practical significance.From the point of domestic and foreign research, the foreign research is in-depth and comprehensive covering the causes of arbitrage, arbitrage opportunities, the reaction rate of arbitrage and the arbitrage model, and in the selection of arbitrage model, it is not limited to the cost of carry theory and cointegration model, but many scholars have put forward no-arbitrage pricing, Bayesian statistical methods and threshold cointegration theory. Domestic research focuses largely on theoretical principles of stock index futures arbitrage and arbitrage model selection, in the choice of arbitrage model, most studies are based on the theoretical basis of the cost of carry, but due to the disadvantages such as strict theoretical assumptions, the dividend yield uncertainty, unclear open standards and differences in the set of model parameters, it leads to the subjectivity of the conclusions of the model. So the purpose of this paper is to try to apply the threshold cointegration model to China’s HS300stock index futures arbitrage proposing a new visual for stock index futures arbitrage model.This study is centered on the use of the threshold cointegration model in China’s HS300stock index futures arbitrage and arbitrage effect analysis. First we introduce the self-excitation threshold autoregressive model to explain non-linear dynamic mechanism of the error correction item, and then we use high-frequency five-minutes data of HS300Index futures and spot prices for empirical research to prove that the equilibrium error can be described by a three-mechanism (ie.two-threshold) SETAR model and compared with the linear regression model, this model fits the data better. Then confirming that the threshold cointegration model also applies to China’s stock index futures and spot market, we can take advantage of the SETAR model to estimate the threshold for arbitrage operations, select the appropriate arbitrage opportunity. Finally, we compare the arbitrage effect with the results based on the cost of carry model and analyze the differences in the characteristics of arbitrage opportunities and arbitrage income.On the choice of research methods, we combine the theoretical analysis with empirical research and use Hansen’s grid search method to estimate the threshold and the SUP-WALD to test the overall model. The use of measurement tools in this article includes the R software packages, EVIEWS and EXCEL.The structural framework of this paper is divided into six parts:the first chapter is the preface, we firstly introduce the background of China’s stock index futures as well as the significance of the study in this article, and then review and analyze the relevant literature from the three prospective of cost of carry model, cointegration theory and threshold cointegration theory, and finally conclude the main research content and innovation. Chapter Ⅱ introduces the related concepts and basic principles. Chapter Ⅲ reveals stock index futures arbitrage basic model.In this part, we introduce several commonly used arbitrage model.The chapterⅣ is the empirical research, we apply the threshold cointegration model to China’s futures market and spot market to verify the applicability of threshold cointegration model or SETAR model in China’s stock index futures arbitrage. ChapterⅤ analyze the arbitrage effect, we analyse the arbitrage opportunities and arbitrage gains compared with the cost of carry model.Chapter VI is conclusions and outlook.Through empirical analysis, this paper has drawn the following conclusions:1, the use of threshold cointegration in China’s futures market and spot market is feasible, and the equilibrium error term can be described by a three-mechanism (i.e.two-threshold) SETAR model.2, Having proving the applicability of the threshold cointegration model, we can take advantage of the SETAR model to estimate the threshold for building the no-arbitrage interval, and use the no-arbitrage interval to select the appropriate arbitrage opportunity for arbitrage. This is a new way for the future analysis of China’s stock index futures arbitrage.3, By the comparative analysis of threshold cointegration arbitrage model and the cost of carry arbitrage model, the results show that in this article in the selected samples, the threshold cointegration model can get more arbitrage opportunities and arbitrage income.(1)From the arbitrage opportunities:these two models both draw up the same conclusion that the arbitrage opportunities are more than40percent of all the trades.(2)From the arbitrage income:The average arbitrage rate of return based on threshold cointegration arbitrage model is higher than that based on the cost-of-carry model, and the positive and negative arbitrage yield both meet the above relationship, the calculation results are also consistent, indicating that there is substantial arbitrage income in China’s stock index futures market.The innovation of this paper is:1, in the choice of data, we mainly use the actual transaction data after the formal launch of stock index futures, considering different characteristics the stock index futures arbitrage may exhibit in the rise and fall phase, we select two samples in rise and decline phase in order to prove the applicability of the threshold cointegration model in both periods, so the results are representative:and taking into account the intraday volatility of the spread, research data is used every five minutes of high-frequency.2, In the choice of the model, this paper applies the threshold cointegration theory to China’s stock index futures arbitrage for the first time,and put forwards with the grid search method based on SETAR model and SUP-WALD test, and using the R software to achieve results; then we summarize the effect of arbitrage under this threshold cointegration relationship, Finally, we analyse the model compared with the cost of carry model,and concludes the outcomes..3, On the choice of the spot, this paper uses the HS300Index price series as the spot for empirical analysis under the background of the upcoming of the HS300ETF. This is because from the point of the high correlation between the HS300ETF Fund and the HS300.However, due to the level of knowledge and statistical software operating capacity constraints, there are many inadequacies and parts for further study in this article. They can be briefly summarized as follows:1,On the choice of samples, there exists a sample inadequacy problem in the rising phase of the sample.since the time when the market is in the downward phase is more than the time when the market is in the rising phase.2,On the choice of model, despite the self-excitation threshold autoregressive model has been extensively used for nonlinear dynamic relationship of financial time series analysis by abroad researchers, but some scholars have pointed out that the other nonlinear models such as Smooth Transition Autoregressive Model is more effective in the analysis of certain variables, this article verifies the effectiveness of the SETAR model only, without further study of other nonlinear models. Therefore, further use of other nonlinear model for analysis is valuable and meaningful.3,On the threshold estimation and model inspection, due to time and technical factors, this paper only uses a grid search method to estimate the parameters, constructing SUP-WALD statistic to test the model, but we can also consider the rearrangement auto-regression, Bayesian method and other methods. It’s likely to have a new discovery combining with a variety of methods.4, in the establishment of the model, this article does not consider the positions and volatility clustering, but in the further modeling we should consider these characteristics, more complex models should also consider the Chinese market investors irrational emotion as well as the Chinese stock market serious information disclosure.5, On the research of the arbitrage opportunities and arbitrage income, due to the lack of program operation to accurately determine the arbitrage trigger point and end point and calculate the arbitrage earnings of the corresponding period, we just take a more or less formula for calculating approximate analysis, leading to its conclusion biased.6, in the process of conducting empirical research, we at the same time draw the following conclusions:First, based on threshold cointegration and cost of carry arbitrage model,the same conclusion can be drawn that the arbitrage opportunities in the second half of2011is lower than the2012period; Second, the threshold cointegration model is able to capture more negative arbitrage opportunities,wheareas the negative arbitrage opportunitie is rare based on the cost of carry model; Third, based on the cost of carry model the positive arbitrage yield is higher than the negative arbitrage yield, while based on the calculation of threshold cointegration the negative arbitrage yield is higher than positive arbitrage yield. Although these conclusions are not the contents of this article, it is possible to provide a direction for future research. |