The Empirical Study On Volatility And Correlation Of 10-year CFFEX Treasury Bond Futures

Chinses bond market had been through bull market and bear market in bonds from 2013 to 2016,with the exchange of policy,increasing the risk of interest rate.Both administration and investors need to know the situation of bond market and the way to manage risk.To build volatility model and correlation model of 10-year Treasury Bond Futures are important,while analyzing its market functions like price discovery and risk managemet.Daily and 5-minute transaction data of the dominant contact of 10-year Treasury Bond Futures,5-year Treasury Bond Futures and Treasury Bond ETF are used for empirical study:While building volatility model,the goodness of insample fitting and outsample VaR prdiciton showed that Realized GARCH model which contain highfrequency data and realized measure performed better in discriping risk of bond market in China.After adding dummy variables in GARCH,the results showed changes on risk and efficiency of information absorption in spot market after the issuance of 10-year Treasury bond futures.The results of SVAR model and its three tools showed that there were mean spillover effect in both bull and bear market between spot and futures.Lastly,dynamic correlation and spillover effect between spot and future market was descriped by the empirical results of VAR-Realized GARCH-ADCC model.The empirical study showed the market function of treasury bond futures still have long way to go:10-year Teasury bond futures had weak price discovery function.10-year Teasury bond futures can be used for hedging risk,and the performance of risk controlling by using VAR-Realized GARCH-DCC dynamic hegding ratio is better than traditional methods.