Statistical Modeling And Empirical Analysis On China’s Treasury Bond Futures Price Discovery Function

Treasury bond futures is a kind of interest rate derivatives which can provide investors with a new investment and risk management tools to asset allocation effectively, hedging, arbitrage and avoid risk. It has now become the world’s most important and most active futures varieties. In China, investors in Shanghai have an opportunity to trade treasury bond futures in the 1990 s. However, it quickly closed due to the lack of condition. In September 6, 2013, China financial management department relaunch the five-year bond future contract, This greatly contributed to the development of China’s capital trading platform.The object of this research is to discuss whether the treasury bond futures have the price discovery function in the capital of China’s bond market. In this paper, we use the unit root test, co-integration test, Granger causality test, impulse response analysis, vector auto regression model and vector error correction model to analysis the day trade data and high frequency data of the treasury bond futures, and this analysis demonstrates that in the current market, there is a long-term stable equilibrium relationship between the future and bond market. And when the equilibrium deviates, a sequence of moves that led to the fluctuation with another sequence, so that the two sequences can maintain the equilibrium relationship before. The futures price is the granger reason of bond market, and futures price have a more than six minutes leading time to the bond price. In the end, based on VEC model, the paper build the regression equation to predict the treasury spot prices, and put forward proposals to the current policy.Through a variety of analyzes, this essay finally issued that Chinese treasury bond futures have a price discovery function. This further illustrates the issuance of treasury bond futures is a successful attempt that in line with the law of development of the financial market. The success of treasury bond futures will also accelerate the pace of development and the introduction of more financial derivative products, in this way we can establish a more mature, perfect and effective capital market.