Research On The Functinal Effectiveness Of China Volatility Index

The US VIX index was proved to be able to effectively reflect the market panic,after it was developed and its derivatives were also favored by investors during the crisis.After the financial crisis in 2008,the world has launched a volatility index based on the domestic securities market,June 22,2015,Shanghai Stock Exchange also issued the China Volatility Index(i VIX index)based on the Shanghai 50 ETF,since then,the Chinese investors has its own reference index In the measurement of market volatility.However,Whether the i VIX index can play its application function to the VIX index is not yet known.The significance of this paper lies in the full and detailed study of the functional validity of the i VIX index,which gives the investors and regulators a useful reference.iVIX index coincides with the Chinese stock market CBBC conversion,coupled with the Chinese capital market is not sound.In view of this special background,this article divides the period from February 9,2015 to January 30,2016 into irrational period and Rational period,and analyzes the functional validity of i VIX index comprehensively.First of all,This paper reviews the compilation principle of volatility index and its development process.Secondly,on the basis of predecessors' research,the function of volatility index is divided into three blocks: the function of reflecting market sentiment,the function of forecasting market,The function of managing market risk.At the same time,it expounds the theory of the three functions,supplemented by the VIX index as an example.Then,the validity of the i VIX index function is tested from the statistical point of view and the empirical model.In general,in the irrational period of market,the function of reflecting market panic sentiment of the i VIX index is to be improved.While in the rational period,the function of reflecting market panic sentiment of the i VIX index is effective.In warning market conditions,the function of warning the crisis of the i VIX index is insufficient,While in the rational period,the function of forecasting the crisis of the i VIX index is effective.In managing market risk,The function of managing market risk of the i VIX is effective at a crisis of rationality,which is consistent with the characteristics of volatility index risk management.Finally,this paper gives four recommendations based on the empirical results: improve the i VIX;increase the public opinion of i VIX index;reduce the investment threshold of the SSE 50 index options;develop i VIX index derivative products as soon as possible.