The Profitability and Arbitrage Efficiency of the Chicago Mercantile Exchange Nikkei 225 Futures

IF 2.6 Q2 ECONOMICS

Asia-Pacific Financial Markets Pub Date : 2024-06-05 DOI:10.1007/s10690-024-09469-4

Jieye Qin

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Abstract

This article studies the profitability and arbitrage efficiency of the Chicago Mercantile Exchange (CME) Nikkei 225 futures. As one of the most typical quanto derivatives in the world, the CME Nikkei futures is traded in dollars while the underlying Nikkei index is traded in yen. The special characteristic involves more complicated uncertainties, which necessitate an investigation into its profitability and efficiency. To this end, we construct an arbitrage-free quanto pricing model to examine the mispricing of the CME Nikkei futures and the underlying spot prices for potential arbitrage opportunities. Distinguishing an ex-post trading rule from an ex-ante trading rule, we conduct non-parametric moving block bootstrap simulations to test the significance of profitability in the CME. The results show insignificant ex-post profitability but significant ex-ante profitability before and after the 2008 global financial crisis. Moreover, delayed execution significantly impacts the futures profitability. Profitable arbitrage opportunities are confirmed by implied transaction costs and explained by lagged absolute mispricing, lagged error, futures time to maturity, stock volatility, and trading volume in the CME. These findings have important implications for practitioners in their cross-border arbitrage trades, and for policy makers in their regulation of quantos in futures globalization.

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芝加哥商业交易所日经 225 期货的盈利能力和套利效率

本文研究了芝加哥商品交易所（CME）日经225指数期货的盈利能力和套利效率。作为世界上最典型的量化衍生品之一，CME日经指数期货以美元交易，而日经指数以日元交易。这种特殊的特性涉及到更复杂的不确定性，这就需要对其盈利能力和效率进行研究。为此，我们构建了一个无套利的定量定价模型，以检验CME日经期货和标的现货价格的潜在套利机会的错误定价。区分事后交易规则和事前交易规则，我们进行了非参数移动块引导模拟，以测试CME中盈利能力的重要性。结果表明，2008年全球金融危机前后的事后盈利能力不显著，但事前盈利能力显著。此外，延迟执行显著影响期货的盈利能力。获利套利机会由隐含交易成本确定，并由滞后绝对错定价、滞后误差、期货到期日、股票波动率和CME交易量解释。这些发现对跨境套利交易的实践者和期货全球化中配额的政策制定者具有重要的启示意义。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Asia-Pacific Financial Markets ECONOMICS-

CiteScore

3.00

自引率

0.00%

发文量

期刊介绍： The current remarkable growth in the Asia-Pacific financial markets is certain to continue. These markets are expected to play a further important role in the world capital markets for investment and risk management. In accordance with this development, Asia-Pacific Financial Markets (formerly Financial Engineering and the Japanese Markets), the official journal of the Japanese Association of Financial Econometrics and Engineering (JAFEE), is expected to provide an international forum for researchers and practitioners in academia, industry, and government, who engage in empirical and/or theoretical research into the financial markets. We invite submission of quality papers on all aspects of finance and financial engineering. Here we interpret the term ''financial engineering'' broadly enough to cover such topics as financial time series, portfolio analysis, global asset allocation, trading strategy for investment, optimization methods, macro monetary economic analysis and pricing models for various financial assets including derivatives We stress that purely theoretical papers, as well as empirical studies that use Asia-Pacific market data, are welcome. Officially cited as: Asia-Pac Financ Markets