China's Stock Index Futures Product Design

Any financial derivative coming into being has it's specific time and economic background, stock index future also was not an exception. The establishment and development of financial derivatives market are the embodiment of the capital market's continuously mature and deep. At present, the institutional investors have a large proportion in Chinese capital market, and most of the investors have become very professional. Because of that, there has a strong demand for the anti-risk mechanisms to control the risks of investment. Under the specific circumstance of Chinese capital market, the investors have no effective way to manage the investment risks, especially have great difficulties to control the system risk. The stock index future is a very efficient instrument to deal with it. We could foresee that the stock index futures would be introduced orderly after the reformatory of the share owner-ship separation of the state-control joint-stock companies on the stock market, because it helps the development of Chinese capital market.Since being introduced in 1980's, stock index future has become one of the most successful financial derivatives after twenty years'development. Starting from 1999, China has paid a lot of attention to it, especially in 2001 and 2002. Less than half a year, the index of stock market decreased by 40 percent, investors had to undertake great losses. Because of that, the market has appeared strong voice of stock index future. Due to many reasons, the introduction of stock index future still has no clear time schedule so far. On Sep 9, 2004, the stock index broke down 1300 points, it's the time for China's capital market to take further reform.The introduction of 300 Index in Shanghai and Shenzhen stock markets made investors see a gleam of daylight. Under this condition, this...