Research on the structural attribution and market impact of the deep discount of CSI 1000 stock index futures
Year: 2025
Type: article
Abstract: This study investigates the structural causes and market implications of the persistent deep discount in CSI 1000 Index Futures (IM) since its 2022 launch, where the annualized basis widened from -0.26% to -1.79% by 2025, peaking at - 13.76% as of July 2025. Contrasting with milder discounts in CSI 300 (IF) and SSE 50 (IH) futures, this phenomenon challenges traditional cost-of-carry models. Employing a novel three-dimensional framework—"risk premiumderivative structure-liquidity fragmentation"—and integrating data on Snowball product knock-ins (peaking at 5200 points with RMB 25.4 billion scale), dividend yields (1.26%), and risk-free rates (1.64%), we reveal deviations driven by amplified hedging pressures, small-cap volatility compensation (1.5-2.0%), short-selling constraints, and liquidity disparities (Gini coefficient 0.68). Innovations include the Structural Basis Index (SBI peaking at -8.5) and extended models incorporating implied risk premiums and Gamma factors, explaining 85% of variances via OLS regressions and simulations. Findings highlight self-reinforcing feedback loops exacerbating spot market instability and arbitrage inefficiencies, with cross-market comparisons underscoring China's unique quantitative demands. Policy recommendations advocate tiered Snowball regulations, basis swaps, and liquidity incentives to narrow discounts by 5-8%, while investor strategies emphasize AI-enhanced hedging for rational pricing equilibrium.
Author: KE DENG
Institution: Central University of Finance and Economics
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4412668853