Study On Hedging Effect Of The Stock Index Futures Based On GARCH-VaR Model

With China’s stock market scale’s expanding, the number of investors is growing, and therequirements in risk management are increasingly urgent. In2010, China’s financial marketintroduced a stock index futures contract, and it provides an effective method of system riskmanagement. Investors can use stock index futures hedging to manage the system risk in theirinvestment portfolio, which will provide the reference for investors to plan their investment.The paper applies the method of VaR, GARCH model and comparative analysis toanalyze the hedging effect of the stock index futures. Firstly, the paper introduces the relatedtheories of the stock index futures and hedging, and it also studies the system risk in China’sstock market and the correlation between stock index futures and spot index. Secondly, thepaper chooses IF1112and HS300as the representatives of stock index futures market andspot market. And according to their closing price, it gets their yields and does relatedinspection, descriptive statistics test, the ADF test, cointegration test and Granger causalitytest to prepare for the further empirical studies. And then, it quotes GARCH-VaR model tocalculate the VaR values of HS300index and stock index futures hedging, and throughcomparing, it analyzes the stock index futures hedging effect quantitatively. Lastly, accordingto the result of the study, the paper provides the relevant application suggestions for themarket participants and regulators. The study of stock index futures hedging effect based onGARCH-VaR model has important theoretical and practical significance to investors in riskmeasurement and system risk management.