Empirical Study On Hedge Ratio Of Treasury Bond Futures

It has been18years since the "327" Treasury Bond Futures Event occurred in1995, and Treasury Bond Futures restarted listing on September6,2013. The healthy development of the bond market, which is an important part of the capital market, will play a positive role in promoting the national economy. Meanwhile, as an indispensable part of the bond market system, treasury bond futures will, for the most part, improve the risk management ability of institutions’bond investment, thus leading to a virtuous circle and promoting bond market’s status in national economy from all dimensions such as issue, transaction and risk management.To hedge interest-rate risk is the main function of the treasury bond future market. By means of establishing appropriate position opposite to the spot market, investors can effectively hedge the risk posed by a change in interest rates of the future market. It is through hedging transaction of treasury bond futures that the risk aversion can be accomplished. With the acceleration of the interest rate marketization, the situation of Central Bank determining the interest rate will be changed. Instead, it will be determined by the supplier and demander in the market. At the same time, the range and the frequency of interest rate’s variability will be increased. The reopening of treasury bond futures serves precisely as an effective risk-aversion tool for them. Therefore, the research of hedging is of practical value and significance for risk management, among which the hedge ratio is the most central issue.On the basis of the basic hedging theory and classical model, referring to the domestic and international outstanding research method, the paper selects the most actively traded treasury bond futures contract and the5year treasury bond ETF to analyze the hedge ratio deeply. The hedge ratio model used3common ones:ordinary least square (OLS), binary vector autoregression model (B-VAR), error correction model (ECM). Goal is to gain the applicable model under different circumstances and to provide advice to investors on choosing the appropriate hedging model.