A Research About The Influence Of The Launching Of SSE 50 ETF Option To Chinese Stock Market

As the economic globalization has becoming the trend of the world,how to control investment risk may be one of the issue witch attracted the most focus from investors.Financial derivatives is a kind of tool which can efficiently decrease the investment risk.It has growing fast from its first showing up.Financial derivatives market of China developes late and covers less investment products.After cautious consideration and discussion,SSE 50 ETF option officially launched in February 9th,2015.It's the first kind of exchange-traded option in China.It has been two years since the launching of SSE 50 ETF option.There are a lot of issues deserve research.By study the changes of stock market's volatility and the influence brought by option to stock market,detailed research about option could be done.It provides reference to investors and policy makers to help Chinese financial market to develop better.Markov-Switching-GARCH model is used in this research.It combines single state GARCH model and Markov state transition model.By dividing time series into more than one state of volatility,it overcomes the shortcomings of the old model and gives different parameters to different volatility states,making it possible to describe different features of different states.At first,I compared the result of Markov-Switching-GARCH and GARCH model and found that Markov-Switching-GARCH model is better in fitting the sample.The result is fitter the reality.Then by using Markov-Switching-GARCH model to analyze the SSE 50 ETF yield rate before and after the launching of SSE 50 ETF option and compare the change of yield rate volatility,I drew the conclusion that the launching of SSE 50 ETF option decreased the volatility of stock market and increased the stability.The innovation of this research is fitting time series sample with Markov-Switching-GARCH model which divides time series into two state of volatility so that the results are more valuable.It overcomes the shortcomings of the old model.By calculating the mean time of sustainability of different state and comparing the change of this parameter,I analyzed the effect it brings and the reason behind it,making the conclusion persuasive.