Research On Domestic Basis Characteristics And Related Contract Design

At present,our country develops financial derivatives market vigorously,issuing several stock index futures options in succession.The difference between the stock index futures price and the underlying price is the stock index basis,which can reflect the changes of the two markets and is an important market indicator.However,domestic stock index financial products start late,and there are still gaps in relevant research.Moreover,due to the particularity of the Chinese stock market,the research on the international market cannot be directly applied to the domestic market.In terms of application,although financial futures are limited by the cost of short selling and fail to give full play to their value,related structured products have shown a trend of diversification and are widely favored by investors in recent years.In order to design structured products based on domestic basis,this paper studies the characteristics of stock index basis.Firstly,the non-linear characteristics of the basis are determined by BDS test,and the threshold autoregressive model is selected to fit the stock index basis data.Since basis is affected by multiple factors,12 indicators such as basis lag term,price deviation index and VIX index are constructed,which are divided into four categories:basis own influence,market activity,volatility and market sentiment.Then the 12 indexes are taken as threshold variables respectively.The threshold interval of each index is given,meanwhile the changing trend and regression strength of basis in different market environments are analyzed.The results indicate that when market sentiment is strong and volatility is high,the convergence of basis is slower,and the spot indicator can better reflect the characteristics of basis than the futures indicator.On top of this,basis structured products are designed from the perspective of investors,issuers and regulatory authorities.The designed basis contract gives a high coupon to meet the investment demand and increases the basis cushion to reduce the investment risk.In addition,the contract trigger indicator is not easy to control,which can avoid market manipulation.In essence,the contract is a short basis call option,which is based on the issuer’s own asset pool and gives part of the income of the reverse basis arbitrage in the form of coupon to alleviate the weakness of the short side of the stock market.Secondly,combined with historical data,contract backtest is carried out to analyze practical application results.This paper takes the basis lag term and price deviation index as examples.which backtests the CSI 300 stock index data and screens out the contracts that do not meet the establishment conditions.According to the target,the knock in direction is selected and the holding period and return is calculated.Furthermore,it adjusts the compensation multiple to reduce the impact of large losses,and tests the return of stock index hedging investment strategy.The empirical studies convey that there is a large knock-in risk in naked position,the risk is greatly reduced after hedging,and the compensation adjustment is more suitable for investors with low and medium risk preference.Finally,different markets are simulated to explore the performance of the contract.Based on the threshold autoregressive model fitted above,random numbers conforming to the basis distribution are weighted to generate simulated data.After analyzing the contract results,it finds that the simulation results are higher than the actual backtest returns and the losses are underestimated.The distribution parameters are modified to simulate market changes,while the VaR and Sharpe ratios are calculated.The outcomes present that the existing market is in the suitable range for investment.When the mean basis increases and the price deviation from the index decreases,the investment risk increases significantly.It is suggested to hedge the stock index at the right time to improve the overall investment return and reduce the risk.