The Research Of ETF Arbitrage

The history of ETF has only ten years a bit more since the born of world first ETF in 1993. It has been one of the most important derivatives on international financial market for its big transacting quantity and frequency. Chinese first ETF STM50ETF was listed at the bottom of 2004 on Shanghai stock market. As a new type fund, people pay a great attention to its property, working principle and arbitrage mechanismIn this paper, the author will make a positive analysis to the STMETF50 working principle, arbitrage function and etc on the base of ETF arbitrage principle. Some conclusions and teachings will be drawn with the expectation that institutional investors will be well advised from this paper. The paper consists of five parts. The first part is the review of the research about ETF and the background of this paper. The second part presents the ETF organizational working pattern and property. ETF working procedure and influencing factors will be discussed in the third part, and it will involve ETF arbitrage principle and its condition. Tracking Error, discount, and premium and how arbitrage costs will affect to arbitrage will be analyzed in this paper. The fourth part is research about how the undulation of the STMETF50, stock changing, cash substitution, cash difference make influence to ETF50 arbitrage. Some conclusion will be drawn in the fifth part.