The reason why stock index futures can be used to avoid the risk of stock price fluctuation is because of the correlation between stock index futures market and stock spot market. That is, the futures price of the same stock index is basically the same as the spot price. More importantly, as the expiration date of futures contracts approaches, the futures price of stock index gradually converges to the spot price index. It is the consistent correlation between the two markets that enables investors to hedge the profit and loss of stock index futures with the equivalent loss of stock spot.
The effect of hedging is related to the proportion of systemic risk in stock spot portfolio. According to relevant research, in the American stock market, systemic risk accounts for 30% of the total stock market risk; In China stock market, systemic risk accounts for about 60% of the total risk. Through comparison, it can be seen that it is more necessary for China stock market to hedge with stock index futures.
It is precisely because stock index futures can only hedge the systemic risk represented by stock index, and in investment practice, the portfolio held by investors is usually a stock spot portfolio, and its systemic risk needs to be measured by beta coefficient, and then the stock index futures are used to hedge. So, how to determine the number of contracts for stock index futures hedging?
Firstly, the correlation between each stock in the stock spot portfolio and the whole market is calculated, that is, the beta coefficient between each stock and the corresponding market index of stock index futures. Beta coefficient is an index used to measure the correlation between the risk of a single stock and the risk of the whole stock market. For example, the beta coefficient of a stock is 1.2, which means that if the whole stock market falls by 10%, the stock will fall by 12%. Therefore, the greater the beta coefficient, the higher the correlation between individual stocks and the whole market.
Secondly, the market value of each stock is multiplied by its beta coefficient, that is, the market value of individual stocks to be hedged is corrected, the corrected market value of stock spot portfolio is obtained by adding the corrected market values of individual stocks, and then the corrected combined market value is divided by the unit contract value of index futures, and finally the number of contracts to be hedged is obtained.
For example, a stock spot portfolio held by an investor, in which the market value of China Merchants Bank is 300 million yuan, the beta coefficient is 1. 1, and the stock market value corrected by the beta coefficient is 330 million yuan; China Ping An has a market value of 200 million yuan, with a beta coefficient of 1.09, and the stock market value after the beta coefficient correction is 21.800 million yuan; Vanke is 300 million yuan, the beta coefficient is 1. 15, and the stock market value after the beta coefficient correction is 345 million yuan; In total, the stock market value of the spot portfolio of this stock after the beta coefficient correction is 893 million yuan, and the beta coefficient of the portfolio is 1. 1 16. According to the current unit contract value of Shanghai and Shenzhen 300 index futures is 930,000 yuan, it can finally be calculated that the number of stock index futures contracts required for hedging is/930,000 yuan =960 lots.