An Empirical Study Of Intertemporal Arbitrage Of Stock Index Futures

Since CSI 300 index futures first came into stage in April 2010,its unique short selling mechanism as well as “T+0” trading mode has provided multitude of investors with a brand new target asset outside stock market.There is no denying the fact that CSI index futures' ever-growing trading volume gives rise to a series of advantages,among them,functions such as hedging and price discovery not only offer an effective method to analyze stock market,but also make it more feasible for investors to add value to their assets.Arbitrary methods circling around index futures abound,including cross-term arbitrage where index futures interact with their underlying assets,intertemporal arbitrage among themselves and crossmarket arbitrage among diverse markets.This article mainly focuses on intertemporal arbitrage.Intertemporal arbitrage utilizes spread of index futures contracts with different maturity dates to explore arbitrary opportunities.If spread experiences abnormal fluctuations deviating from average value,arbitrary opportunities arise.There are two prevailing intertemporal arbitrary models,one based on cost carry model and another based on co-integration test.This article analyzes the result of empirical study after introducing different models' theories and arbitrary strategies.The article gives priority to intertemporal arbitrary opportunities between spot and next futures contracts based on statistical arbitrage,and program to analyze effects on total return rate by introducing a variety of threshold values(open position\offset\stop loss).Frequency range discussed centers on 1 min index futures' closing prices and day's closing prices.The article finally comes to a conclusion by analyzing a large amount of data that total return rate reaches its maximum value with the threshold value interval [0.5,0.7] under the high-frequency condition,which does not fit low-frequency condition.Besides,the article also introduces no-arbitrage interval based on cost carry model,by comparing it with statistical arbitrage model,based on the analysis of advantage and disadvantage of different models in combination with result of empirical study,the article concludes that facing the same spot-next contract,statistical arbitrage is superior to cost carry model under both high and low frequency,thus,the former model fits investors better,although traditional model itself performs better under low-frequency than under higher one.