Research About The Optimal Hedging Strategy In Stock Index Option Of China

In February of 2015, China’s first exchange-traded products-the Shanghai 50 etf options is listed, there was one more trades in the derivatives market of China.the addition of a variety of transactions. As one of the hedging tools, options can help avoid risks while still not flush the merits of the proceeds, so option is widely used by hedgers. And in the various markets, the same kinds of hedging strategies have different effect. Therefore, in order to help investors make the right decisions when using 50ETF hedge, in this paper, several hedge model performance on the Chinese market were empirical. During the demonstration, the paper selected the put option listed in August 2015 and expires in March 2016 and the Shanghai 50ETF during the same time as the research object, using three static hedging strategies (OLS、B-VAR、 ECM) and two dynamic hedging strategies (GARCH and Copula-GARCH) to calculate the best hedging rate which can minimize the risk of portfolio, exploring the optimal hedging model. The results showed that B-VAR and ECM models do not apply to this market, while OLS, GARCH and Copula-GARCH can be effective in reducing the risk of the portfolio in which the dynamic hedging model GARCH and Copula-GARCH hedging effect is better than static hedging models OLS. At the same time, taking into account the variance of financial time series with time variability, this paper established RV-Copula model which is the combination of realized volatility and Copula correlation coefficients, to examine whether the model can improve the efficiency of the model, the results show that when the frequency of high frequency data is 15 minutes, the resulting optimal hedge ratio can not only reduce the risk of the portfolio, but also can improve the yield of the portfolio. The conclusion obtained in this paper can provide investors who use stock index options to hedge in our country’s market some suggests.