The Empirical Study On The Hedge Of SSE 50 Futures

Share price index future is an important product in financial derivatives.Its main role is to avoid risks.In some developed countries,the development of share price index futures is mature.As an emerging capital market,China's own stock market is at great risk since its volatility is much larger than in developed countries.In the past,there was no effective hedging instrument,and the risk of investors was completely exposed.This has caused losses in the interests of investors and affected the stable development of China's financial market.In order to alleviate this situation,the China Financial Futures Exchange officially launched the SSE 50 share price index futures contracts on April 16,2015.The listing of SSE 50 stock index futures has changed the situation that China's stock market cannot sell short,which makes stock investors have more hedging choices.An ETF is an index fund with a variable fund share that is traded on the exchange.ETF is a type of open-end fund,but it is special because it not only has the operational characteristics of an open-end fund,but also has the same way of buying and selling as a closed-end fund.The ETF can short the relative number of share price index futures based on the size of its stock position.As the stock index declines,the stock market value continues to decrease,but its futures short position will be profitable to preserve the stock market value.Therefore,the use of SSE 50 share price index futures to hedge the SSE 50 ETF has important theoretical and practical value.This essay studies the use of SSE 50 share price index futures to hedge the SSE 50 ETF.Foreign studies on hedging have focused on hedge ratios and they built many different models to calculate the hedge ratio.These models are calculated differently and perform differently in different financial markets.Therefore,in order to more scientifically test the hedging function of the 50 futures,this paper uses five commonly used models to calculate the hedge ratio,which are: OLS,B-VAR,ECM,EC-GARCH and EWMA.The Ederington method and utility increments are used to compare and analyze their hedging effects from the perspectives of risk minimization and benefit maximization.In addition,this paper also studies the influence of investor's risk aversion coefficient on the optimal hedging model selection.In the end,through empirical analysis,the impact of hedging time span on hedging performance is studied,which provides theoretical and practical advice for investors to use HSI 50 stock index futures for hedging..