Research On The Functions Of Stock Index Futures Market Based On Margin Financing And Securities Lending Transactions

Margin financing and securities lending transactions will be implemented in the stock market of China, which will change the unilateral market pattern of stock market.On the other hand, the stock index futures market will soon be established in China, which will improve the capital market structures and the capital market functions. No matter whether the margin financing and securities lending transactions or the stock index futures will come firstly, we can consider that in the near future, the margin financing and securities lending transactions and the stock index futures will coexist in our capital market.Then, based on the margin financing and securities lending transactions, what will be like the stock index futures market functions including the hedge, the arbitrage, and the price discovery and so on? The paper aims at these questions, and carries out the mathematical deduce and the empirical study with the data of Shanghai and Shenzhen 300 stock index futures simulation transactions. Through these researches, it indicates the development directions and ways of the securities and derivatives in China, it provides the valuable policy-making basis for the effective supervisions, it helps the investors of stock markets and futures markets to make discisions correctly to invest, to hedge and to arbitrage, and at last, it riches the valuable related literatures for the functions of stock index futures based on the margin financing and securities lending transactions.The paper mainly studies the functions of stock index futures including the hedge, the arbitrage, and the price discovery functions under the background of margin financing and securities lending transactions.In the first chapter of the paper, the research background, the research significance, the research subjects, and the research frameworks are introduced. The paper especially emphasizes the research backgrounds. That is to say, the margin financing and securities lending transactions and the stock index futures simulation transactions is its unique research backgrounds. In the second chapter of the paper, some related basic categories and concepts are carried out their explicit means, including the margin financing and securities lending transactions, the stock index futures, the Shanghai and Shenzhen 300 stock index futures simulation transactions, the stock index futures'functions including hedge, arbitrage, and the price discovery functions, and how the margin financing and securities lending transactions influence on the stock index futures'functions.And the third chapter studies the hedge function of the stock index futures under the margin financing and securities lending transactions. Using mathematical model's deducing, it is found that margin financing and securities lending transactions affect the hedge direction, the hedge cost as well as the optimal hedge ratios (quantities) of the stock index futures. When constructing the hedge strategies, referring to the JSE (Johnson-Stein-Ederington) approach, the HKM (Herbst-Kare-Marshall) approach, and the Kroner and Sultan ECM-GARCH model, this paper constructs the cross hedge model, the dynamic hedge model and the compound hedge model based on the margin financing and securities lending transactions. The paper has also carried out the empirical examinations with the data from the the Shanghai and Shenzhen 300 stock index futures'simulation transactions.The fourth chapter studies the arbitrage function of the stock index futures under the margin financing and securities lending transactions. Because the stock index futures is only the Shanghai and Shenzhen 300 index futures in China futures market, arbitrage and spread opportunity can be found. The margin financing and securities lending transactions influences the upper and lower bounderies of the non-arbitrage intervals, and it influences the arbitrage opportunity and arbitrage degree. By using the forward arbitrage principle to determine the upper boundery, using the reverse arbitrage principle to determine the lower boundery, and using the MPR to reflect the degree of the stock index price deviates from the non-arbitrage intervals, the paper then presents the arbitrage opportunity and the degree. Finally, the paper extends the principle from the arbitrage to spread and provids the strategy of the arbitrage and spread, and constructs the compound spread model of stock index futures.The fifth chapter studies the price discovery function of the stock index futures under the margin financing and securities lending transactions. Generally speaking, the price discovery mainly includes two aspects: Different reactions rate of different market to recent information; the ratio of recent information integrates into different market prices. In the ordinary circumstances, the stock index futures market and the stock markets have different price discovery functions. The insider traders'choosing the different microscopic structure market to exchange mainly have four kinds of reasons: Release lever, transaction cost, uptick rule, market systematic information, which determins that the price discovery function of the stock index futures market surpass that of the stock market.But when taking consideration of the margin financing and securities lending transactions, something will be changed. Margin financing and securities lending transactions have the release lever transaction and the low transaction cost characteristic, which changes the four hypothesises, and change the price discovery functions.The paper studies the lead-lag relations between the stock index futures and the stock market under the margin financing and securities lending transactions.In this paper, the innovations and contributions are as follows:1. The paper has systemly studied the functions (including hedge, arbitrage and price discovery) of the stock index futures based on margin financing and securities lending transactions in China.2. In the research of stock index futures'hedge function, it has considered the influence of margin financing and securities lending transactions on the stock index futures.it has constructed the cross hedge,the dynamic hedge,and the compound hedge model of the stock index futures based on the margin financing and securities lending transactions.3. In the research of stock index futures'arbitrage function, it has constructed the bounderies of the non-arbitrage intervals of the stock index futures based on margin financing and securities lending transactions,and has also promoted the compound arbitrage decision model, as well as compound spread decision model.4. In the research of stock index futures'price discovery function, it has considered that the release lever transaction and the low cost transaction of stock will change the lead-lag relation between the stock index futures and the stock.Some problems in the paper haven't been solved, including:1. Because the margin financing and securities lending transactions and the stock index futures have not been existed in China, the paper has stressed in carrying out the theoretical deduce and providing the related strategy methodology. Regarding the empirical study, it has mainly carried out the Shanghai and Shenzhen 300 stock index futures'simulation transaction data.As a result of the simulation transaction data's limit, some results may be different when use the real transactions data to carry out the empirical studies.2. As a result of data origin aspect limit, the data used in the empirical studies of the paper are interday data, the stock index futures market functions especially the arbitrage function and the price discovery function are affected. The empirical examination of functions usually needs to use the high frequency intraday data, some conclusions may be different when substitute the interday data to intraday data to carry out empirical studies.