Research On Pricing Efficiency Of Sse 50ETF Options

On February 9,2015,Shanghai Stock Exchange launched the SSE 50 ETF option.So far China has the first standardized on-the-spot stock index option.As the most basic derivative,Shanghai 50 ETF option provides investors with new trading mode and risk management tools.What impact does it brings to the market quality of the underlying spot(Shanghai 50ETF)after its listing? Is the direction of impact positive or negative? What role does it play in price discovery? All these problems deserve further study.Firstly,this paper studies the impact of 50 ETF option on the liquidity of 50 ETF spot market using the market quality index(MQI)proposed by Bollen and Whaley(1998)as a measure of liquidity.It also sets two sample intervals through event study method and compares the quality changes of spot market before and after option introduction with regression analysis.Empirical results show that after the introduction of 50 ETF options,the market quality index of 50 ETF market has been strengthened,and the liquidity of 50 ETF funds has been improved.This paper also studies the price discovery function of SSE 50 ETF option.Qualitative research on the leading lag dynamic relationship of 50 ETF options,50 ETF futures and 50 index futures in Shanghai Stock Exchange is carried out by using co-integration test,Granger causality test and vector error correction model.Then,permanent short-term model,information sharing model and modified information sharing model are used to quantitatively calculate the contribution of options,spot and futures in price discovery.The results show that the 50 ETF option features a one-way price guidance to the 50 ETF spot with 11 minutes' ahead and the spot does not lead the option.Whereas there is two-way price guidance between the 50 ETF option and the 50 stock index futures of Shanghai Stock Exchange with the futures leading the option for 4 minutes and the option leading the futures for 2 minutes.In order to improve the pricing efficiency of Shanghai 50 ETF options and make full use of its function in improving the spot market,managers should strengthen the education on investors and market transparency as well as improve the structure of investors and the market mechanism.