A Comparative Study On The Construction Of Shanghai 50ETF Option Arbitrage Strategies Based On Different Volatility Models

Financial derivatives were born in the 1970 s,and since their inception,they have grown rapidly due to increased competition in the financial industry and the need for arbitrage,hedging and speculation.In particular,the characteristics of intertemporal,leverage,linkage and uncertainty of financial derivatives play an important role in investment arbitrage and risk management.With the continuous financial innovation of financial institutions,domestic and foreign financial derivatives have been introduced,and the option products benefit from the unique profit and loss structure and risk management functions,providing investors with additional potential profit space.On February 9,2015,the first option of China--50 ETF option was traded in Shanghai Stock Exchange.It not only declares the arrival of the Chinese option era,but also means that China has a full set of mainstream financial derivatives.Since2015,the bear market has been going on for three years.The Chinese stock market has experienced a mad cow market,a stock market crash,and a slump.Since the contract was traded,the 50 ETF market has been stable overall and there has been no serious bubble phenomenon.It is an excellent case for the research of the options market.At present,domestic option investors mainly use 50 ETF options for transfer risk,and there are few studies on arbitrage strategies.This paper combines the volatility model comparison study with the option arbitrage strategy to study whether there are arbitrage opportunities on the upcoming exercise date.This paper analyzes different volatility models by referring to relevant literatures at home and abroad,and constructs the arbitrage strategy of 50 ETF for option sample data from WIND financial database.On the third Wednesday of each month,the monthly volatility model(GARCH model,high-frequency data volatility model)is established to predict the target asset volatility for the next five trading days.At the same time,the implied volatility obtained by the B-S-M model is calculated.Next,build a straddle option portfolio and backtest under four open positions to determine the optimal strategy.By comparing the backtest results,it is found that under the circumstance of opening and closing positions,the three volatility models can obtain the maximum yield and profit rate.Among them,the option straddle arbitrage combination based on the B-S-M formula to calculate the implied volatility has the highest income and rate of return.