Comparison Of Futures Contracts Arbitrage In China And USA Futures Markets

With the launching of stock index futures,financial derivative products trading will play a more and more important role in China’s capital market, of which futures market is one of the most important part,because of price discovery and hedging function which stock market and bond market are incomparable. Based on Co-integration theory,this paper analysis price relationships between soybeans,soybean oil,and soybean meal in China and the U.S. futures market.After that,this article try to build portfolio arbitrage program according to different price relationships and find some important conclusions through different empirical study of China and the U.S. Futures market.In addition,we try to consider the possibility of arbitrage through these two futures market,in order to compare arbitrage program and improve it.This paper construct different program of arbitrage of China and the U.S. market,and mainly focus on portfolio building,risk control mechanism,and trading time limit.This not only gets a complete investment strategies,as well as explain the reason of different arbitrage program.This paper concludes arbitrage program has price basis only based on price relationships arbitrage program that has a basis support in reality,and arbitrage program simply by measurement of the cointegration relationship does not convince professionals.This article first reviews the literature of futures contracts arbitrage and price relations on domestic and abroad.these studies are basically just for arbitrage or futures contract price relationships.The contribution of this paper is to combine price relationship with arbitrage.price relationship explain why arbitrage strategy in different futures market are distinct.On the other hand,price relationship analysis gives some advice to arbitrage program of risk control and trading time limit.Then this paper introduce principle of futures arbitrage, patterns of futures arbitrage relationship between futures contract with arbitrage and Co-integration theory which pave the way for the empirical research.Cointegration theory is the fundamental basis of the established portfolio,and arbitrage portfolios risk control strategy is also based on Co-integration theory of Error Correction Model.The most important part of this paper is empirical study.this article use the same method to test the stationary of soybeans, soybean oil and soybean meal for four years data.We find that these three price series are integrated of first order, and they are Co-integration relationship using ADF test.Based on these conclusions,we build the portfolio using the crushing ratio in China and the U.S.arbitrage program design, we find that the U.S. futures market squeeze profit value is positive, but Chinese futures market squeeze profit is negative whose standard deviation is greater than that of the U.S. futures market.On the other hand,the rate of short-term price deviation return to long-term equilibrium in China futures market is slower than the U.S. futures market.Finally,this article summed up the reason why arbitrage strategy in China futures market and the U.S.futures market are different,and then we provide some suggestions for China’s futures market arbitrage.