The Empirical Study Of Stock Index Futures Arbitrage Mechanism

The launch of stock index futures has deepened China’s financial markets with risk hedging tools. However, its own leverage and the characteristics of the zero-sum game are likely to cause irrational speculative behavior, which are not conducive to improving the efficiency of market pricing and playing a role in risk transfer. In order to have a stable, mature and healthy market, this paper proposes to strengthen and improve the arbitrage mechanism, by which to improve the efficiency of market pricing and the stability of market, and also to cultivate rational investment institutions.This article is divided into sixchapters. The first chapter is an overview of the literature review and related theory. It’s an outline of domestic and foreign scholars’research findings in the pricing of stock index futures, arbitrage-free zone, the arbitrage opportunities, as well as the tracking error measure. Relative to the domestic scholars, this paper will be based on real market data rather than simulation of transaction data, and also the established model took the real costs and institutional factors into account in order to have more realistic meanings. Significantly, we analyses the statistical arbitrage, co-integration and error correction model, laying the foundation for the later establishment of a model of calendar spread arbitrage.The second chapter is a brief description of the stock index futures arbitrage. First of all, this chapter gave a detailed description of the stock index futures’ content, features and functions. It is characterized by short-selling derivatives and can trade by margin. The main function of stock index futures is to circumvent the systemic risk of the stock market and price discovery. Then, this chapter describes the arbitrage’s concept, characteristics and classification, in order to be able to have a clearer understanding of the entire arbitrage.The third chapter is the empirical analyses of index-futures arbitrage. This chapter mainly analysis the following aspects:the model, the replication of the CSI300index, parameter selection and the empirical analysis. Based on the classic cost of carry model and fully considering the impact of arbitrage costs and institutional factors, this article established arbitrage-free zone which is consistent with the realities. And also using the stratified market capitalization weighted to build a stock portfolio, which has a strong realistic meanings. The fourth chapter is the empirical analyses of calendar spread arbitrage. First of all, this chapter gave a general introduction to the concept and types of calendar spread arbitrage. And then, based on the cost of carry theory, this article used co-integration and error correction method to establish quantitative model of calendar spread arbitrage. Finally, this chapter gave the detailed operating procedures and empirical analyses.The fifth chapter is the study of risk management. Based on the risk that existed in the arbitrage process, the VAR approach can quantitative analyze and monitor the risk. And also it is a good guide for regulatory authorities to strengthen risk management and regulatory policy-making.The sixth chapter is the conclusions and suggestions. This chapter gives some summary conclusions and proposes to some relevant suggestions. In order to guarantee the health and long-term development of the market, this chapter puts forward some institutional measures to promote the full development of arbitrage investment strategy.