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A Theoretical And Empirical Study Of Spread Arbitrage In Stock Index Futures

Posted on:2014-02-02Degree:MasterType:Thesis
Country:ChinaCandidate:Z M ZhouFull Text:PDF
GTID:2249330392461264Subject:Finance
Abstract/Summary:PDF Full Text Request
Since CSI300index futures were listed on April162010, it has been operating very well andbecome an essential part of China’s financial markets. The emergence of stock index futuresincreases the variety of investment tools in the financial markets, provides a new way to achieveshort-selling and risk management, and promotes the development of the investment modelsand investment philosophy. On one hand, the market of stock index futures provides spreadarbitrage as a new class of investment channel. On the other hand, the implementation of stockindex spread arbitrage can promote stability and efficiency of the stock index future market,facilitating its diversified functions to the financial markets. Therefore, the study on spreadarbitrage in stock index futures has great practical significance.Based on the functions and pricing theories of stock index futures, this article examines theliquidity of four contracts of CSI300index futures. Specifically, it investigated into theintertemporal spread and cointegration relationship between contracts of current month andnext month. After analysis of two sets of phenomena and theories, two models are proposed:(1)no-arbitrage interval model based on cost-of-carry theory, and (2) moving average arbitragemodel based on mean reversion theory. This article also finds a way to combine the advantagesof the two models to form a new arbitrage strategy and examines the actual effects of the arbitrage strategy from both the long-term and short-term perspective.The main conclusions are as follows:(1) There is a significant cointegration relationship between contracts of current monthand next month of CSI300index futures.(2) The intertemporal spread of CSI300index futures has five major characteristicsincluding concentrated distribution, high stability, and regular movement, which provides thefoundation for spread arbitrage.(3) The intertemporal spread of CSI300index futures shows significant mean-reversioncharacteristic when the time parameter is3days or5days.(4) The arbitrage strategy proposed in this article can obtain a stable stream of profits.
Keywords/Search Tags:Index future, Spread arbitrage, Cost-of-carry theory, Mean reversion theory, Cointegration relationship
PDF Full Text Request
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