The Optimal Hedging Ratio Of The Stock Index Futures

Stock index futures is a kind of hedging risk of financial derivative instrument,plays a very important role in risk management in capital market. First of all, enrichesthe subject of investment diversification; secondly, to reduce the volatility of the spotmarket and stabilize the spot market. Hedging based on the consistency of thefluctuation of the spot and futures market. The accuracy of the hedging effect dependson the determination of hedge ratio. China launched the first stock index futurescontract, CSI300Stock Index Futures contract, in April16,2010. Over20years ofunilateral trade pattern. The emergence of stock index futures, opened a new pattern ofChina’s stock market. As a kind of financial hedging tools, CSI300stock index futuresplays an important role in China’s stock market. It has positive realistic guidingsignificance for the optimal hedge ratio of stock index futures.We use four kinds of widely used model to determine the optimal hedging ratio,respectively is OLS model, ECM model, GARCH model and Copula-GARCH model.Select Shanghai and Shenzhen300index and small and medium-sized plate of objecthedge, hedging with the CSI300Stock Index Futures.First of all, to analyze thecorrelation between CSI300Stock Index Futures and Spot ETF data. The results showthat, there is a long-term stable equilibrium relationship between Shanghai andShenzhen300index, Small and Medium-sized plate of ETF and CSI300Stock IndexFutures.In this paper, using OLS, ECM, GARCH and Copula-GARCH model to estimatethe hedge ratio between CSI300Stock Index Futures and Shanghai and Shenzhen300index, small and medium-sized plate of ETF. The risk minimization principle forevaluation of the effect of hedging, taking HE as the evaluation index,to determine theoptimal hedge ratio.The research results show that, the Copula-GARCH model is theoptimal model to determine the optimal hedge ratio between Shanghai and Shenzhen300index and the CSI300Stock Index Futures, and also the optimal model todetermine the optimal hedge ratio between Small and Medium-sized plate of ETF andthe CSI300Stock Index Futures.The determination of optimal hedge ratio were:0.909566and0.893117; to avoid the risk of efficiency were:88.29%and80.56%.Finally through the out of sample data test shows that the conclusion of this paper has acontinuity, applicability and predictive.