Research On The Intertemporal Arbitrage Of Treasury Bond Futures

The treasury bond futures in our country has been retraded in September,2013. Asan interest rate derivative, it has many advantages such as low transaction costs and itcan be transacted reverse. It offers a short selling mechanism for bond market andprovides a channel of investment for investors in our country. The arbitrage of treasurybonds futures can improve market liquidity, promote price discovery and increase theefficiency of capital allocation. Therefore the research on treasury bond futuresarbitrage strategy is very necessary. The five year treasury bond futures contract is theonly interest rate futures contract launched by China Financial Futures Exchange inpresent. So we can’t arbitrage across market or cross species. The scholars in ourcountry mostly focus on the intertemporal arbitrage.We take intertemporal arbitrage as the research object, choose two kinds ofintertemporal arbitrage idea—historical simulation and statistical method—designedtwo kinds of trading strategies. Take an empirical study on the intraday1minute highfrequency data of treasury bond futures. Then setting parameter on the basis of domesticreality. Take the parameters into the model of two strategies and analysis the arbitrageeffect. Firstly measure the high frequency data and obtain the best open and stop lines.Then take the line into out of sample data and calculate the arbitrage effect of twostrategies. The calculation of high frequency data is complex and repeatedly. So weneed to develop a program to calculate the results of the two strategies.The results of two strategies show that there are a lot of arbitrage opportunities inthe present market. We can achieve the profit by each of strategies and gainsconsiderable. Compare the two methods we can find that there are more arbitrageopportunity in historical simulation method, the forward arbitrage opportunity is asmuch as the reverse arbitrage opportunity. There can discover less arbitrageopportunities in statistical arbitrage method and mostly is the reverse arbitrage. Thecomparison of empirical results show that obtains by historical simulation method ismore sable. The daily returns are equal between the sample data and–sample data.While the short-term income is fluctuates greatly in statistical arbitrage method. Thedaily returns by–sample data is significantly lower than it by sample data. But thesuccess rate in statistical arbitrage method is higher than it in historical simulationmethod whether in forward or reverse arbitrage. And the total return in statistical arbitrage method is higher than it in historical simulation method. Analyze thecomprehensive factors we can know that statistical arbitrage method is better than thehistorical simulation method. We can choose statistical arbitrage method as the firststrategy choice in the future.