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Comparative Analysis of Stock Index Futures Pricing Model

Author: GaoYang
Tutor: WangQingShi
School: Dongbei University of Finance
Course: Quantitative Economics
Keywords: Stock index futures Pricing model Comparative analysis Cost of carry General equilibrium
CLC: F832.5
Type: Master's thesis
Year: 2011
Downloads: 304
Quote: 0
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Abstract

Stock Index Futures is an agreements to buy or sell a standardized value of a stock index, on a future date at a specified price. As an investment instrument it combines features of securities trading based on stock indices with the features of commodity futures trading. It allows investors to speculate on the entire stockmarket’s performance, short sell (see short sale) an index with a futures contract, or to hedge a long position against a decline in value.On April 6,2010 The CSI 300 stock index futures contract launched in China. At the first day, the volume was 10000. But on April 30,2010. It went to 196296. For the stock index futures traders. Because the stock index futures hedging and hedging risk and the pricing of stock index futures has great relevance, Stock index futures pricing readiness is one of the most concerned problems. Choosing the right pricing model is the key. We can improve the pricing of readiness and provide a basis for traders to choose the direction of option trading by using the appropriate pricing model.With the development of the Stock index futures set in the past 30 years, there were a lot of Stock index futures pricing models. The pricing model of stock index futures can be divided into the following five main theoretical models through my research results at home and abroad. Respectively holding cost model, continuous-time models, pricing models, general equilibrium models, and incomplete market pricing models.Using the no-arbitrage pricing theory of holding cost model is the most basic method of pricing model. Comprehensive transaction costs, financing costs, savings and loan benefits poor factor pricing model provides a no-arbitrage pricing interval. Suppose we relax the interest rate that the rate is the continuous-time stochastic volatility pricing model is an extension of holding cost model. Thought of introducing of the theoty general equilibrium, we can obtain that stock index fluctuation and interest are main factors affecting futures prices. The Incompletion of the Pricing model will be used in the Fixed interest pricing method witch is used for Stock index futures pricing There are four parts in this passage.The first part, introduce the meaning of the topic and the background. Statistics Stock index futures of pricing aspects both here and aboard.The second part, introduce on the basis of. I have talked about the six pricing models, Make comparison with the six pricing models from assumptions, theoretical basis, Mathematical model respectively. Through the analysis, we know the Hypothesis of perfect market is strict. The pricing model does not require a perfect market hypothesis. Continuous time interest rates follow mean-reverting process of square root. Incomplete market pricing model assumes that the rick free asset subject to stochastic processes and risk asset follows the geometric Brown motion. The basic theory of holding costing model, Continuous time model, and Interval price model are the same. They all use the way:no arbitrage method simulated cash flow. No arbitrage pricing model is using B-S model’s solution and efficient frontier are derived. Holding the mathematical form of costing model is the most simple.The third part, we did the empirical tests of all contracts about the CSI 300 prici ng model from April 16th,2010 to June 17th,2011 with the application of above six pricing model. The contacts are divided into short-term delivery contracts and long-t erm delivery contracts, and comparative analysis of the results of the examination. T he empirical results display that the application of General balanced model and actua 1 difference minimum price are minimum. The application holds cost model and cont inuous time model of theory price and actual price of difference model than General balanced model. The application does not full market pricing model came of price re lative errors third small, pricing results most bad of is no arbitrage practice pricing m odel. Interval pricing model empirical results show that delivery 45 per cent of the a ctual price of the contracts in the near future in the trading day in the no-arbitrage pri cing interval, and arbitrage opportunities in the long-term delivery contracts of far m ore than short-term delivery contracts, CSI 300 index futures a lot positive arbitrage opportunities.The fourth part, the summary of the whole paper. The main study methors of this paper are Summary of academic thought, Comparative analysis, Empirical Analysis. Looser assumptions than the holding cost model, setting the model taking into account the factors as fluctuations in the spots market, the mathematical form of the model is simple, easy to operate. Applied the CSI 300 stock index futures to the empirical analysis, we find that the efficiency of general equilibrium pricing model is the highest in the five pricing model. The relative error of the recent delivery contract is 0.006388704, the mean of the relative error of long-term delivery contract is 0.010052916, are smaller than the other four pricing models.The innovation of this paper: Apply cost of ownership model, continuous time model, Range of ricing models, General equilibrium model, in complete market pricing model to fix a price of all delivery contrasts which are from April sixteenth, 2010 to June seventeenth,2011. combine theoretical comparison and empirical comparison to get the optimal model. It is general equilibrium model.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial market
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