A Study Of Hedging Ratio In HS300Stock Index Futures Based On The Copula-EGARCH Model

Through decades of development, the securities industry of China is stronger and stronger, but a stock market in China has always stock shorting in a long time and also lacks of the stock shorting mechanism. With the advent of stock index futures, the situation only doing more unilateral in the securities industry has been totally changed, and then, the securities industry of China has entered the era of bilateral. In the three main factions of stock index futures, hedging is one of the most momentous functions and strategies. For those hedging needs of investors, especially institutional investors, the hedge is the most basic and commonly used strategy. Therefore, this paper will first research the features of Chinese securities industry, and then deeply discuss the measurement model of optimal hedge ratio, expecting to get the hedging results which fit Chinese market.This paper studies the asymmetric correlation between the spot and futures markets. The relevance between futures and spot prices tend to descend when markets fluctuate upward and ascend when markets fluctuate downward. The usual CCC-GARCH and DCC-GARCH model can not work out this problem, so we introduce the Copula function to our model. This paper will compare the effectiveness of new methodology with the OLS,CCC-GARCH and Our results indicate that compared to other dynamic models, the Copula-EGRACH model can get a bigger profit at the same risk and take a smaller cost in adjusting the hedging positions.