Chinese Stock Index Futures Cross-species Arbitrage Quantitative Model

With the continuous development of China’s financial market, a variety of new financial instruments continue to emerge, April 16, 2015, SSE 50 Index Futures and the CSI 500 index futures traded on the China Financial Futures Exchange, the realization of the diversification of China’s financial index futures, the stock index futures cross species arbitrage become possible.This paper reviews the domestic and foreign scholars’ related research on investment arbitrage and quantization, puts forward the stock index futures cross-species arbitrage quantitative model based on industry factor.This paper first reviews the methods of classic futures arbitrage strategy: based on the mean reversion and based on the trend.Then from the valuation, the market capitalization and industry distribution point of view, compares the similarities and differences of the CSI 300 index futures, the SSE 50 Index Futures and the CSI 500 index futures, found in the card 500 index futures on the three angles is significantly different from the CSI 300 index futures and the SSE 50 index futures.Then analysis the correlation of the CSI 300 index, SSE 50 index and the CSI 500 index, found the SSE 50 index and the CSI 500 index minimum correlation. Their trend differences are largest and they have most arbitrage space, so the SSE 50 Index Futures and the CSI 500 stock index futures are selected to be the arbitrage object. Then, making correlation test of single industry factor and relative strength of index, day of the industry factor and the next index relative strength of index correlation coefficient is relatively small. It is difficult to use factor of a single industry to predict the next day relative strength index.In order to overcome the disadvantage of single industry forecast factor, we decided to use the combination of industry factor to predict relative strength of index. By logistic regression, the industry factor combined prediction of the SSE 50 Futures(index) and CSI 500 Futures(relative strength index). In considering the variety of transaction and transaction costs and the impact of the cost of the case, to build the stock index futures cross-species arbitrage quantitative model. In back test, the model achieves more than 50% of the annual yield, Sharpe ratio of more than 1, with the same period in the CSI 300 index compared with obvious advantages. It is proved that the feasibility of the stock index futures cross-species arbitrage quantitative model based on industry factor. Then in order to observe the model, according to the two classic cross-species arbitrage strategy, design and its application in China’s stock index futures. Due to lack of the basic conditions for statistical arbitrage of stock index futures in China, so the main comparison between cross-species based on the trend of the stock index futures arbitrage strategies and the stock index futures cross-species arbitrage quantitative model based on industry factor, through comparison and further analysis show that the stock index futures cross-species arbitrage quantitative model based on industry factor is feasibility and superiority.