Cross-species Arbitrage Strategies About SSE 50 And CSI 300 Stock Index Futures

Before the SSE 50 and the CSI 500 Index futures release, domestic research on index futures arbitrage focused on arbitrage and inter temporal arbitrage. After the new index futures appearing, the content that can be studied has been greatly expanded and arbitrage cross varieties becomes possible. This paper choose the SSE 50 and the CSI 300 Index Stock Index Futures as a subject to study the cross-species arbitrage trading strategies. This not only enriches the research on index futures arbitrage in cross-species theory, but also provide investors more opportunities for arbitrage. It also can further promote China’s financial futures market development.Domestic and foreign scholars have a very in-depth study on cross-species arbitrage. Cross-species arbitrage’s basic meaning is that different types of futures contracts open long positions and short positions, and the use of spread volatility to make profits. The SSE 50 and the CSI 300 Index futures 5 minutes high frequency data’s characteristic are mainly two. In the long run, the SSE 50 and the CSI 300 Index futures prices have a strong correlation. In the short term, price fluctuations in the two futures contracts is different.Based on this spread, this paper proposes a cross-species arbitrage trading strategies, mainly designed from three aspects, namely the cost of arbitrage trading, determining arbitrage-free interval and arbitrage trading algorithms. Cost arbitrage trading mainly includes fees, commissions and margin. For the no-arbitrage interval, it uses a nonlinear cointegration, respectively threshold cointegration and threshold vector error correction model to estimate the no-arbitrage interval.The biggest innovation of this article is to design the arbitrage trading algorithms, which is mainly to set the opening and closing points. Most previous studies mostly using the no-arbitrage interval border as the opening and closing points. But this article takes into account the changes in spreads have the inertia. When subjected to the market forces or other factors, the spreads would be restored. Therefore, when the opening points set, we introduce the one lag of spreads as the determination condition. As a result, we can avoid the inertial motion of spreads, and greatly improve the success rate of the carry trade. For the design of the opening points, the arbitrage trading earnings will be used as judgment condition. We set a number of parameters, such as the starting point of only profit, maximum profit and stop-loss point to determine the earnings situation.Finally, this paper examines the two non-arbitrage interval’s practical effect. The results show that the success rate arbitrage strategy of both models has reached more than 75%, which prove the validity of the arbitrage strategy. And arbitrage strategies of both models are given a very good rate of return. After the stock market crash, The CICC has a substantial increase in the stock index futures’ trading commission. If the fee can be reduced to the original level, then the income can be increased to the three original times. At the same time in simulated trading process, we discovered that a theory is not very consistent with the phenomenon, and the paper finally gives a reasonable explanation.