Stock index futures is officially listed for trading in China Financial Futures Exchange at April16,2010. As one of the important financial derivatives in modern society, stock index futures has been playing an irreplaceable role in the financial markets since it was invented. Stock index futures has two main functions, price discovery and hedging. And hedging ratio is the key to hedging. The hedging ratio is the ratio between the total value of futures contracts and the total value of spot contracts. However, hedging takes a certain cost, including direct cost, indirect cost and opportunity cost of funds used. Those costs have an important impact on the hedging ratio and affect the results of hedging.The article carries on the quite comprehensive theoretical and empirical research to the impact of transaction cost for hedging ratio. And the article uses the data of HS300stock index and. In the process of empirical research, first of all, the article arrives at different hedging ratios through the simple hedging model, the OLS model, the ECM model and the GARCH model and evaluates the different hedging ratios through the hedging efficiency index. Then, the article takes the transaction cost into account and evaluates the different hedging ratios through the . Through the comparison of two different results, the article demonstrates the impact of transaction cost for hedging ratio and suggests that stock index futures hedgers should choose different hedging ratio according to their own transaction costs. When transaction costs are low, hedgers should select the hedging ratio based on the dynamic hedging model, while when transaction costs are high, hedgers should select the hedging ratio based on the static hedging model.
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