| With the trade of CSI 300 stock index future becoming increasingly active, index future drives more and more attention. However, Singapore and Hong Kong Exchange issued FTSE A50, H shares index future a long time ago. Thus, the Chinese index future investors should not only focus on the domestic market, but also the global market.We study the foreign simple examples at first, such as cross-market arbitrage of Nikkei futures between the Singapore and Osaka Exchanges, as well as the arbitrage between Chicago and Osaka exchanges. These cases shed us light on the pricing of foreign-issued index futures, which contains an item standing for the exchange rate risk. The cross-market arbitrage of Chinese index futures is a bit different, as they not only contain exchange rate risk, but also converge to different indices. As a result, the cointegration analysis is necessary.Cointegration analysis shows that CSI 300 index future is linked with the other Asian market index futures. Impulse response analysis explores how the Chinese stock index future markets affect each other.With a constraint optimization model, we separate the whole strategy problem into three parts:the ratio, the time and the risk. For the ratio part, as we study the arbitrage between CSI300 index future and the H shares index future, we take both of exchange risk and the index difference into account. Innovatively, we conduct cointegration analysis on the product of index and exchange rate to solve this. For the timing and risk parts, our study mainly bases on VECM. The value of the error correction item is the measure of markets’deviation. The quantile of the item is the value at risk. At last, we apply 47 pairs of delivery dates data to further prove the applicability of our strategy.In this paper, we give a comprehensive analysis of cross-market arbitrage, which is to provide theoretical support for the arbitrageurs and a new view to study the linkage between future markets. |
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