Research On The Application Of Statistical Arbitrage In The Chinese Treasury Bond Futures Market Returns

The abnormal fluctuations in the stock market in 2015 had very tremendous impacts on the entire financial market, and the volume of CFFE stock index futures declined significantly after the trading rules’several adjustments. Large amount of cash exited from the stock market and flowed into bond market. At the same time, the trading volume of treasury bond futures increased actively as one of the few shorting instruments. Statistical arbitrage, which is a representative of market-neutral strategy, is playing a more and more important role on improving market liquidity, stabling price and other aspects.Firstly, this paper makes a brief analysis of the status of arbitrage trading in the treasury bond futures market, and summaries the statistical arbitrage and cointegration theories after detailed reviews on related researches both in China and abroad. Then it creates a statistical arbitrage trading system on the spreads of treasury bond futures matured in different months and work out the trading signals of the dynamic statistical arbitrage, including strategies based on Gaussian noise, GARCH(1,1) model and OU process, which set trading rules with the experience from practice.Secondly, this study chooses the 5 minutes high frequency price and volume data of CFFE 10-year bond futures contract from March 20th 2015 to February 19th 2016, and makes backtesting analysis of the dynamic statistical arbitrage model with three portfolios of time spread based on the data above, after which, it updates and adjusts the sequences information through rolling estimation and prediction during the process of statistical arbitrage backtesting. It verifies that both statistical arbitrage strategies based on Gaussian noise, GARCH(1,1) model and OU process performed well in China’s treasury bond futures market.