CSI 300 Stock Index Futures Optimal Hedge Ratio

Stock market has two types of risk:systematic risk and unsystematic risk.Portfolio management theory put forward that a non-diversified diversification can avoid non systematic risk.The hedging function of stock index futures is a powerful tool to avoid systemic risk.Generally,asset price are slightly smooth change,with continuity.But when major or abnormal information appears,asset prices will have a large-scale,sharply,discontinuous fluctuations,that is jump.Jump is essentially the market information to reach the performance of the price discovery,which reacts the market efficiency.Although the possibility of this jump is very little,but due to the relatively large jump amplitude cannot be ignored.This article research mainly focuses on three aspects.First,use a progressive test by Zhang Libing,Pan Dehui(2008).Through constructing a jump cumulative effect of statistics of the CSI 300 stock index and stock index futures,and compared with the critical value of its limit distribution,and then judge whether the Chinese stock market and the futures market exist jumps.Second,build ARVI-GARCH-Jump model,portray and analyze volatility of CSI 300 stock index and stock index futures,using maximum likelihood estimation method to estimate the parameters.Based on the parameter estimation,the volatility and jump of CSI 300 stock index and stock index futures return series were detailed analysis.Estimated the hedge ratio of stock index futures at risk minimization and utility maximization principle,and then compared with the estimated results of GARCH model under continuous conditions.Finally,under the principle of risk minimization,using the percentage of variance reduction to measure the effectiveness of hedging.The results found that the model adding the jump factor can better fit the volatility characteristics of asset returns.Using the estimated hedge ratio to hedge,can not only save costs,but also is optimal.In the utility maximization,use the utility increment to evaluate the effect of hedging.The empirical results show that the hedge ratio is limited by investor risk aversion.When risk aversion is greater than 2,the utility of the ARVI-GARCH-Jump model is higher.