Study On Price Limit Of China’s Stock-Index Futures Market

The crash of the stock market in October19th,1987,that made people realized theharm caused by the investors`overreaction to the information and temporary non-equilibrium of Trading orders in the market. Thus, some countries tried to buildsome measures including price limit and circuit breaker to Stabilize the price in theStock index futures market. As the Shanghai and Shenzhen300stock index futurescontracts traded on the official, it indicates that China will appear the coexistence ofstock index futures market and the stock market named cross-market-structure. Inthis case, how to effectively manage the risk in the stock index futures market is veryessential to the healthy development of the stock index futures market. On the basisof some researches conducted by the former domestic and foreign researchers, themethods of Agent-based Computational Finance has been taken to simulate the realoperation of the market.And then the study tried to estimate theoretical price limit byPOT extreme value theory. The paper includes two main aspects:In the first part, the study investigated operation status in different run bychanging the setting of price limit based on the Agent-based Computational Finance.After comparing the Liquidity and Volatility indexes, we find that it is better for theIndex Future Market to maintain the present price limit or loosen the limit of price toa certain extent.In the second part, we use the optimization model based on POT extreme valuetheory to estimate the tails returns distribution of Index Future Market. Then afterinvestigating the relationship between margin levels and price limit, it showed thatthe tails returns distribution of Index Future Market can be well fitted by the Paretomodel. What`s more we suggested the up price limit should be set at9.9%,while thedown should be12.2%.