Research On Price Discovery And Volatility Spillover Between China's Stock Index Option And Spot

As an important financial derivative,SSE 50 ETF options have been receiving much attention since its launch in 2015.The community has a wait-and-see attitude towards whether it can optimize its resource allocation,enrich investors' risk-avoidance channels and improve asset price formation mechanisms.Concerns about its high leverage that may trigger and exacerbate financial risks have never stopped.Whenever there is abnormal fluctuation in the stock market,regulators and investors are accustomed to blaming the problem on innovative tools such as options and futures,which is unfavorable for the healthy development of China's financial market.In order to find out how the derivative products and other derivatives play a role in the capital market,and how it affects the underlying spot,this paper studies the spillover relationship between the SSE 50 ETF option and its underlying spot.Due to the late introduction of domestic options,the research on the relationship between derivatives and underlying stocks in the past literature mostly focuses on futures and spot.There are few literatures on the spillover relationship involving options,and the research on variance overflow is rare.The only few papers are based on short-term high-frequency data to study the price discovery function of 50 ETF options.The research on this problem is mainly focused on the direction and intensity of price guidance.After more than four years of launching the 50 ETT option,this paper has used a longer time span and lower frequency data to conduct a more in-depth study of the spillover relationship between the option and the underlying spot,supplementing the previous literature.The first part of the article explains in detail the background of writing,answers the question of why writing and how to write,and sorts out the literature concerning the relationship between derivatives and spot spillovers.On the basis of previous studies,we explored related issues and proposed possible innovations and deficiencies.The second part of the article introduces the related concepts involved in the article,such as China SSE 50 ETF,volatility and spillover relationship,and also explains the theoretical source of the spillover relationship.The third part of the article introduces the option parity formula,IS model and VECM-BEKK model to be used in the empirical study.In the fourth part of the paper,the variable setting and data verification are carried out.Based on the model introduced in the third part,the spillover relationship is explored.The study found that there is a long-term equilibrium between the 50 ETF option and the target spot price,the option pricing is effective,and the price guidance is mutual.Both of them contribute to the price discovery,but the spot contribution far exceeds the option and is in the dominant position of price discovery.At the second-order moment level,the spillover of spot-to-option is always significant,and the options are not significant except for the significant fluctuations in the spot in 2016.Whenever there is abnormal fluctuation in the spot market,the problem is always attributed to the options market.The practice of limiting the options market is open to question.Studies have shown that the option market should be given sufficient room for development,reduce blind intervention in the options market,optimize the investment environment of the options market,and attract more quality investors to participate in it,so that it can better and faster respond to market information.To play a role in price discovery,risk transfer and wealth appreciation to better serve the capital market.