Abstract

http://ssrn.com/abstract=1953508
 
 

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Index Arbitrage in China


Ronald T. Slivka


New York University (NYU) - NYU Polytechnic School of Engineering

Yikai Zhang


NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering

Wenwen Zhang


New York University (NYU) - NYU Polytechnic School of Engineering

May 26, 2011

Journal of Indexes Europe, January/February 2012

Abstract:     
Financial professionals and scholars generally agree that the two most important transaction types found in global stock futures markets are arbitrage and calendar spreads. Of these it is arbitrage that is the more important, especially in newly developing futures markets such as in China and India. It is also widely agreed that the successful growth of futures exchanges rests heavily upon sustaining a meaningful volume of daily arbitrage transactions. Yet very little is written in detail about the important practical elements of implementing these crucial trades, knowledge of which regulators, investors and exchange officials must have as they seek to develop and participate in efficient equity markets.

Using recent CSI 300 futures data this article seeks to explore specific details of stock index arbitrage in China's new CSI 300 stock index futures market with a focus on ETFs vs. index futures. A knowledge of the requirements for successful arbitrage in this market can suggest to regulators and exchanges steps necessary for making market improvements that can attract and retain foreign and domestic professional investors. Knowledge of the practical means for indentifying and implementing profitable arbitrage can encourage the professional growth of this essential activity that improves market liquidity and stability. Finally, knowledge that index arbitrage is serving to keep futures prices near to their economic fair value can also provide investors and hedgers the assurance they need to comfortably increase their participation in China's rapidly developing stock market.

Number of Pages in PDF File: 11

Keywords: stock index futures, china, ETF, arbitrage, CSI 300

JEL Classification: G13, G15

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Date posted: November 3, 2011 ; Last revised: February 7, 2012

Suggested Citation

Slivka, Ronald T. and Zhang, Yikai and Zhang, Wenwen, Index Arbitrage in China (May 26, 2011). Journal of Indexes Europe, January/February 2012. Available at SSRN: http://ssrn.com/abstract=1953508

Contact Information

Ronald T. Slivka (Contact Author)
New York University (NYU) - NYU Polytechnic School of Engineering ( email )
Brooklyn, NY 11201
United States
2153213524 (Phone)
Yikai Zhang
NYU Polytechnic School of Engineering - Department of Finance and Risk Engineering ( email )
Brooklyn, NY 11201
United States
Wenwen Zhang
New York University (NYU) - NYU Polytechnic School of Engineering ( email )
Brooklyn, NY 11201
United States
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