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The impact of trading restrictions and margin requirements on stock index futures
Author(s) -
Hu Jianqiang,
Wang Tianxiang,
Hu Wenwei,
Tong Jun
Publication year - 2020
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22111
Subject(s) - futures contract , margin (machine learning) , index (typography) , financial economics , stock index futures , stock market , economics , futures market , econometrics , forward market , stock market index , algorithmic trading , position (finance) , stock (firearms) , divergence (linguistics) , empirical research , china , trading strategy , computer science , finance , mathematics , statistics , engineering , philosophy , linguistics , horse , world wide web , biology , paleontology , machine learning , mechanical engineering , law , political science
Stock index futures in Chinese market have consistently diverged from their theoretical values. In this paper, we try to provide some explanations by proposing an equilibrium model. Although the model itself does not provide analytical solutions, it enables us to conduct extensive numerical studies and compare them with our empirical results on two major Chinese market indices, CSI300 and SSE50. Our results show that the divergence of stock index futures prices from their theoretical values may be due to various trading and regulatory constraints, such as position limits and margin requirements, which play significant roles in Chinese market.