Category: Money tips Release Date: 2006-07-25
The launch of stock index futures contracts, the exchange launched the month usually expire next month and the subsequent two quarters due four months of the contract. Stock index futures contract price is reasonable, for speculation and arbitrage, and those who are very important an issue.
Stock index futures pricing model is holding cost pricing model and consider the market two types of limited range of pricing models. Let's explore the cost of ownership, pricing models.
Model assumes that Holding cost pricing model (costofcarrymodel) is a Cornell & French (1983) based on certain assumptions derived ideal markets: the stock index futures contract is a stock portfolio of stock index corresponds to a temporary substitute for the contract is not a real asset, but rather between buyers and sellers of the agreement, both sides agree that at some point in the future to conduct spot transactions, which include: stock index futures prices = spot price + financing costs - dividend yield.
These are the stock index futures pricing is generally assumed in the derivation of holding cost pricing model, do first the following assumptions: (1) stock index spot price is known; (2) stock index futures contracts, stock index corresponding to the spot asset is available points; (3) corresponds to the spot stock index has sufficient liquidity of assets; (4) the cash dividend is determined; (5) borrowing and lending of funds and the interest rate the same as the known; (6) short selling stock index spot did not limitations, and immediately get the corresponding loan; (7) No transaction costs and commissions.
Status of foreign countries in applying the model Holding cost pricing model is widely used stock index futures pricing models. The model was in a perfect market assumptions, based on an arbitrage (Arbitrage) combination derived.
Although, theoretically, index arbitrage operation would make the actual price of stock index futures return to its theoretical price, but the model assumes too much contrary to the reality and ignore the market environment factors, making it in the interpretation and prediction of stock index futures when price movements seem less than perfect, has been abroad A number of empirical researchers found that the actual price of stock index futures and the holding cost pricing model to estimate a theoretical price for significant differences between the.
Holding cost pricing model is mainly of the following shortcomings: failure to consider the index of cash and stock index futures market, the interaction between the assumed risk-free interest rate is a fixed constant, and does not take into account the volatility of stock prices, real capital market friction as well as the reality of capital markets The stock index futures arbitrage risk and so on.
As the holding cost pricing model has some of these shortcomings, we need to take into account market imperfections and the limitations on the holding cost pricing model be revised, but all improved pricing models are in the holding cost pricing model based on the re - make amendments, so the model is still a major theoretical and practical significance.
