The Analysis Of Arbitrage In Stock Index Futures Market During Shock Period In China

The analysis of the arbitrage in stock index futures has been one of the key areas of the following study of its market and products.CFFE officially launched the CSI 500 index futures and the SSE 50 index futures in April 16,2015,which not only became a sign of China's stock index futures market developing from a single-variety market into a multiple-varieties market,but also coincides with the rapid rise period of China's stock market.Thus,the arbitrage trading of stock index futures along with its speculation has become one of the hot topics during the year of 2015.If focusing on that shock period in 2015,investors might find some index arbitrage opportunities beyond the use of high frequency trading,or maybe there was an available inter-commodity arbitrage for the investors to use three future products,particularly the CSI 500 index future and SSE 50 index future which have a huge difference in composition of shares.These two kinds of arbitrage patterns constitute two skeletons of the research of this paper.In addition,2015 was also the hot period for the security investors during the last 8 or 9 years,during which medium and small investors had a much higher degree of participation.Then,for the stock index futures market,which always dominated by institution investors,was there any opportunity for medium and small participants taking part in interest arbitrage? With this doubt,this paper chose data from the view of medium and small investors lacking of assists of stylized trading.Specifically,in order to meet the requirements of inter-commodity arbitrage,select April 16,2015 as the starting point of time frame.Affected by the policy issued in September 2015,the stock index futures market lost its liquidity,therefore,select August 21 st,which was the delivery date of contact 1508,as the end point of the time frame.As counting,there was a total of 95 trading days.Moreover,in terms of data frequency,on the one hand,taking a difference from stylized trading,on the other,from the point of view of small and medium investors,setting aside a certain reaction time,this paper will subdivide the data index to 30 minutes,which means there will be 720 sets of data totally.As for the construction of index arbitrage space,based on cost of carry model by Cornell & French,this paper will show three wave charts of stock index future with time as the horizontal axis,index spot as the benchmark and premium percentage of futures to index spot as the vertical axis.Then by making adjustment of arbitrage cost and error on the vertical axis,it provides a clear construction of arbitrage space with two horizontal lines.With 7 days repo rate of that time as the cost of interest rates,and the 2014 annual average dividend yield of China's stock market as this paper's dividend yield,the theoretical futures price can be reckoned.The transaction cost will be calculated with all the expense and tax involving both future and spot trading.The impact cost and fitting error will be suitably estimated and then adjusted with former result of similar researches of CSI 300 index future.By which means,this paper prefers to take a higher value in a reasonable range,in order to fit the conditions of medium and small arbitrage investors,as well as to make a arbitrage space for the insensitive investors,by showing some opportunities that just can't be missed.In this way,diagrams about the arbitrage of CSI 300,CSI 500 and SSE 50 index future can be properly made,which shows that the arbitrage opportunities fit the relevant theoretical expectations.As for inter-commodity arbitrage,through the analysis on IF,IC and IH contract waving every 30 minutes,along with each standard deviation as well as average premium of futures to index,this paper deduce that in the term of sensitivity,it should be IC > > .Therefore,considering the value of single contract and the market trend,it is better to put IC contract on arbitrage position,and double IH contract on hedge position.The earning test during the shock period shows,although under different operating ideas,the hedging positions shall unavoidable at a certain loss,the arbitrage portfolio,especially during the rising stage,still may get a impressive stable interest.Generally,this kind of arbitrage strategy is just fit for medium and small investors to get involved.Eventually,the market performance during the shock period of 2015 is quite specific,and after the introduction of restrictive policies in September 2015,China's stock index futures market no longer get to keep its high liquidity,however,these methods mentioned in this paper of building index and inter-commodity arbitrage portfolio still have referential significance.What's more,with the deregulation of China's stock index future market which been caught sight of in the first two quarters of 2017,it can be expected that the market will get back to high-active situation soon,which also means,arbitrage activity will regain liquidity.As for the medium and small investors,in the case of clear investment scale and operating limitation of one's own situation,it is possible to use a similar approach to find a particular arbitrage strategy.Also at the end of this paper,it comes up with some suggestions for the market development as well as investors' behavior.