Arbitrage opportunities in CSI 300 stock-index futures market

Abstract

The purpose of this study is to test whether arbitrage opportunities exist in Chinese stock-index (CSI 300) futures market and whether arbitrage opportunities is related to futures duration. Stock-index futures were introduced to Chinese financial market for two years and arbitrage opportunities exist in stock-index futures market in 2010 and 2011. The cost of carrying model is used as fundamental model to price futures and this model is modified to a no-arbitrage opportunities interval which can be used for detecting arbitrage opportunities. Based on my study, arbitrage opportunities still exist in 2012 and the longer the futures duration the more arbitrage opportunities in futures contracts.