The Empirical Research On Efficiency And Basis Risk Of Treasury Futures Hedging In China

Treasury futures is a long-standing,mature and widely-used interest rate risk management tool in the international capital market.China first tried treasury futures in 1992-1995 years,but it failed because of the immature market conditions.In September 6,2013 and March 20,2015,China launched the five-year Treasury futures contract and the ten-year treasury bond futures contract successively in China Financial Futures Exchange,which symbolizes that the financial derivatives market in China has finally ushered in the interest rate risk management tool at the maturity of the marketable interest rate conditions.The relaunch of treasury futures not only promotes the development of the bond issuing market of treasury,but also accelerates the progress of China's marketable interest rate course.The Treasury futures have the functions of price discovery,hedging,promoting treasury issuance and improving the efficiency of asset allocation,especially the function of hedging is the most important function,and a futures that can not give full play to hedging is not a financial asset with practical significance.After China has experienced the failure of the first trial of treasury futures,China relaunched the Treasury futures nearly 20 years later.Whether the hedging function can be effectively played is directly related to the long-term healthy development of China's treasury futures market.This paper focuses on the importance of China's treasury futures to play its hedging function,concentrating on the theme of the validity of the hedging of treasury futures based on two aspects:the one is the performance of hedging and the other is basis risk of Treasury futures hedging.Using the literature analysis method and the empirical analysis method,this paper will study in depth on the effectiveness of hedging of the Treasury bond futures.First of all,on the basis of combing the treasury futures theory and futures hedging theory,this paper expounds the development process of Chinese and foreign treasury futures.and background of futures hedging.Then this paper selects the OLS model,the VAR model and the VECM model to estimate the optimal hedging ratio of the treasury futures hedging positions in different periods in China,and then compares the hedging performance of each model based on judgement of the V-value index and the Hh index.After that,this paper will measure the basis risk in VaR of the 5 year treasury futures based on the VaR-GARCH model.The conclusion is as follows:Fitstly,the complete hedging strategy not only does not reduce the risk,but greatly increases the volatility of the return of hedging positions.On the contrary,the incomplete hedging strategy plays the role of risk hedging better in the vast majority of cases.Secondly,for different duration of hedging portfolio,long term hedging results in three hedging models above is quite close,while the medium and short term hedging in the use of three models,from the results of VECM model and VAR model,the hedging effect is close,while the OLS model leads to the consequence that hedging effect is quite different from the previous two.Thirdly,the VaR-GARCH model,the VaR-EGARCH model and the VaR-TGARCH model can depict perfectly the basis risk of the Treasury futures to hedge.Lastly,the EGARCH model and the TGARCH model can better match the fluctuation of the basis risk in practice than the GARCH model.