A Study On The Futures-Spot Arbitrage Based On The Co-integration Relationship Between Stock Index Futures And ETF

As China Securities Index(CSI)300index futures and Stock Lending andBorrowing were officialiy listed for trading, there appears new opportunity fordevelopment in chinese financial market and its derivatives market.The research onstock index futures's investment has become one of the hottest research focuses infinancial derivatives market while arbitrage trading of stock index futures on the earlyperiod after listing has become the hot subject in academic circles and otherdepartments.The futures-spot arbitrage is the main transaction mode on the early periodafter listing for CSI300index futures, which will play a key role in realizing thefunction on price discovery and stable the order of financial market.The traditional strategy of futures-spot arbitrage based on cost-of-carry model isdifficult to catch the trading point accurately and quickly. In order to help investorscatch the trading opportunity of futures-spot arbitrage quickly, this paper uses theco-integration theory to discover the relationship between the stock index futures and itsspot based on the high-frequency data.In this paper,firstly I summarize the study on futures-spot arbitrage and its tradingstrategy, after analysing the application of co-integration theory in the finanacialderivatives' trading, the mechanism of futures-spot arbitrge between CSI300's futuresand its spot is discussed. Based above, the ways of constructing the CSI300'spot isdiscussed and the co-integration relationship is analysed by empirical research. Theempirical results indicate that when constructing the spot portfolio using SSE180ETFand SSE100ETF based on the propertion0.695?0.305,the spot of CSI300indexfutures is simulated perfectly in this paper. At the same time the results also show thatthere exists co-integration relationship between the CSI300index futures and ETFPortfolio on the preliminary stage of CSI300index futures when there exists manyarbitrage opportunity.Based on the wrong pricing time, the relationship could be usedto dicover the arbitrage opportunity by investors. According to the model above, thefutures-spot arbitrage is carried out and a1.27yield rate in one month is achieved byconducting arbitrage on the basis of the received co-integration relationship.