An Empirical Study Of Commodity Futures Cross-Species Arbitrage

China’s futures market has a certain scale after20years’development. With the increasing variety of transactions, a large number of investors carry arbitrage trading, in which cross-species arbitrage has a growing trading volume. Due to various reasons, scholars have few theory studies on cross-species arbitrage, which provides few references for investors operating cross-species arbitrages. Therefore, studies on theory of cross-species arbitrage and investment programs can provide effective suggestions for the investors and promote the development of cross-species arbitrage in Chinese futures market.The author makes a research on coke and rebar of cross-species arbitrage in China’s futures market with the theory of statistical arbitrage in cointegration relationship. First, the author sorts out the literature related arbitrage theory home and abroad, and summarizes the research status of cross-species arbitrage. Secondly, the author makes correlation test, unit root test and runs test on the prices of coke and rebar with Eviews and SPSS software. The status shows that the correlation coefficient between coke and rebar prices is0.96. That is to say they aren’t up to the weak type of effective market which displays a chance of arbitrage. Thirdly, with the cointegration relationship analysis and error correction model analysis, the author proves that there is a long-term equilibrium relationship between coke and rebar price series, and the half cycle recovery from non-equilibrium to equilibrium is about9days. In this paper, the author designs the trading rules and build a transaction model with the continuous coke and rebar price data from September15,2011to September2,2013as sample. By making empirical analysis on the model, the author finds that when the absolute value of the threshold opening is at85and stop threshold in at different values, transaction models have different profit effects. Open and stop threshold are the keys to the success for any arbitrage models. Finally, the author puts forward some suggestions on the cross-species arbitrage for investors from the risk of cross-species arbitrage aspects.In this paper, the author combines theory with empirical method to study cross-varieties arbitrage, which is beneficial to improve the cross-species arbitrage theory, promote the development of arbitrage trading in China’s futures market and provide valuable investment references for investors.