Arbitrage with CSI 300 stock index futures : an analysis

Abstract

Based on the cost of carry model for futures pricing, this paper discussed the arbitrage-free interval in China spot-futures arbitrage trading market. The cases we analyze are the arbitrage between CSI 300 futures contract and the Huatai-PineBridge CSI 300 ETF, Harvest CSI 300 ETF based on the 1-minute high frequency data for 20 days. We find that the CSI 300 index futures’ forward arbitrage opportunities do exist; however, they are related to the costs of the arbitrage capital. Compared to Huatai-PineBridge CSI 300 ETF, Harvest CSI 300 shows more arbitrage opportunities and a higher rate of return. This efficiency difference is a result of the subscription and redemption mode and trading mechanism of the two ETFs. The results indicate that China stock market is not fully efficient, although the mispricing duration is short.