The Dependency Structure Studies Between Stock Index Futures And Spot Markets Based On Copula-SV Model

Since the stock index futures were officially launched on April16,2010, the stock index futures have played an increasingly active role in China’financial markets. As one of the most basic and most widely used financial derivative products, Stock index futures can reduce transaction costs and avoid systemic risk. But the ’eighty-seven’ stock market crash led the financial turmoil makes people questioned on the stock index futures, the linkage between stock index futures and spot markets also become the focus of regulators and investors. Linear correlation coefficient as a measure of correlation on previous studies, but as the linkages between the financial markets are increasingly complex, linear correlation has been unable to meet the research needs. In addition, the research of dependence structure between markets is also more and more important. Therefore, this paper based on the time-varying Copula-SV model to study the dependence structure and the dependence degree between the stock index and its future market, it makes up for previous studies only consider the relevance and ignore the lack of related patterns.In this paper, the price yield of HS300stock index futures and stock index as the object of study. Taking into account the financial time series leptokurtic characteristics and financial markets maybe appear "leverage effect", using the basic SV, the thick tail SV and leverage SV model in volatility modeling process. The DIC criteria is used to compare and analyze of the goodness of model fitting, and finally select the most suitable model to describe China’s stock index futures and spot market’s volatility process. On the basis of the above, the nonparametric kernel density method is used to estimate the values of residuals distribution function in SV models, and to prepare for further construction of the Copula model. Then build SJC-Copula model to study the time-varying dependence structure of stock index futures and the spot market. Finally, research the dynamic relationship of the upper and lower tail of the two markets, and analysis of empirical results.The empirical results show that the market price return series of HS300stock index futures and spot presents significant volatility clustering phenomenon, and it appears the "reverse" leverage effect. Then by introducing the characteristics of China’s securities market by the behavior of financial theory these two aspects to explain this phenomenon. In addition, the time-varying SJC-Copula model is better to describe the dependency structure between the two markets than constant coefficients SJC-Copula model, it suggests that the relationship of dependency structure of the two markets have time-varying characteristics. Finally, HS300stock index futures market and spot market showing asymmetric tail related, performance on the upper tail correlation stronger than the lower tail correlation. This shows that China’s stock index futures market’s’pushed up effect’greater than its’accelerate fall effect’. When a market is skyrocketing, another market the skyrocketing probability is greater than when a market crash, another market crash probability.