Research On The Measurement Of Basis Risk Of Stock Index Futures Based On VaR-GARCH Model

CSI300index futures was officially launched in April16,2010, which was amilepost sign of China’s capital market. Because the stock index futures can be used inhigh leveraged transactions, it faces a great risk. How to use it hedging has become oneof the hot spots issues for institutional investors. Research on the CSI300index futuresbasis risk has very practical significance. This paper will conduct a comprehensiveresearch on China’s CSI300index futures basis risk. First of all, this paper elaboratesthe concept of basis risk and the relationship between hedging effect and basis risk.What’s more, this paper put forward the ways of empirical research on stock indexfutures basis risk. Besides through the empirical research, this paper predict and analyzestock index futures basis risk. Finally put forward some suggestions about managementof stock index futures basis risk.Through the analysis, variance-covariance method, compared with historicalsimulation method and Monte Carlo simulation method, has the advantages ofconvenient and rapid calculation and easy to collect data. More and more investors andfinancial institutions tend to the variance-covariance method. Because financial timeseries have characters of aggregation, this paper respectively introduces VaR-GARCHmodel, VaR-TARCH model, and VaR-EGARCH model, and by using the three modelsrespectively, calculates CSI300stock index futures basis VaR value and make acomparison. Results show that the three models can predict the basis volatility and theresults are all accurate, but the VaR-GARCH model is the most accurate. In the end thispaper uses VaR-GARCH model.Based on the empirical results, this paper put forward the following suggestions:investors can make the investment strategy by using VaR model; regulators cansupervise the financial market by using VaR model; trading intermediary can buildreal-time warning system by using VaR model.