Trading Strategy Of Stock Index Futures And Its Empirical Research

Stock index futures is the financial derivative which is designed to manage the systematic risk of the stock market. On account of its significant advantages, stock index futures, emerging over the past two decades, has made rapid development and become the most favored and dynamic hedging tool in the financial markets. Although stock index futures has played a paramount role in the stock market to avoid systemic risks and aid the progress of the securities market, it usually tends to contain tremendous risks due to the characteristics of the trading mechanism. Therefore, the task of thoroughly comprehending the trade of stock index futures and grasping the different trading strategies and risk control methods is becoming the key challenge of performing the financial investment and risk management by effectively employing the stock index futures.Starting with the trade object of the stock index futures, the frame of underlying asset and the design are detailedly analyzed in this paper. The three classes of trading strategy are discussed on the basis of comparing the cost of ownership model and the arbitrage pricing model of stock index futures. The evolvement of hedge theory and various types of hedging, along with the corresponding operational processes are examined. For the arbitrage strategy, its corresponding characteristics, types, procedures and development are all explored. Detailed study of the concept theory, economic performance, several kinds and principles of the speculative strategy is also performed.Next, the illustrative analyses for the three sorts of trading strategy are carried out. From the perspective of the minimum risk hedge model, the calculation methods for the minimum risk hedge ratio and the relatively valid indexes of hedging strategy, the total frame of hedge trading strategy is then lucubrated. By constructing the relation between merchandise on hand in Hong Kong stock market and Hengseng stock index futures, the minimum risk hedge strategy is investigated and the application of the major calculation methods for the different minimum risk hedge ratio on Hong Kong market is then validated. Aiming at the arbitrage strategy, the non-arbitrage interval model in unperfect market is particularly explored and the obverse and reverse arbitrage strategies of stock index futures and stock merchandise on hand are respectively illustrated. Meanwhile, the long and short speculative strategies of stock index futures are systematically inquired with practical examples.Finally, the characteristics and source of risk of stock index futures are probed and the diverse kinds of risk of stock index futures which the trader is faced are comprehensively identified. The risk measurement methods of VaR model and the associated advantages and limitations are further discussed. The control and preventive measures which correspond to a variety of risks occurring probably in stock index futures trading are simultaneously presented.