Research on Cross-Breed Arbitrage between Five-Year and Ten-Year Treasury Bond Futures Based on AR-GARCH Model.

Research on Cross-Breed Arbitrage between Five-Year and Ten-Year Treasury Bond Futures Based on AR-GARCH Model. | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Research on Cross-Breed Arbitrage between Five-Year and Ten-Year Treasury Bond Futures Based on AR-GARCH Model. Yanbing Cai, Liping Hou This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-5497178/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper delves into the realm of cross-species arbitrage, specifically examining the relationship between the 5-year treasury bond futures contract TF2309 and the 10-year treasury bond futures contract T2309, along with the corresponding resource management strategy. Utilizing the AR-GARCH model as a foundation, the study employs 1-minute closing price data spanning from May 18, 2023, to July 4, 2023, to conduct a thorough analysis. Initially, the prices of the two futures contracts are subjected to cointegration testing to ascertain their long-term equilibrium relationship, which serves as a crucial step in establishing an arbitrage ratio. Furthermore, the study goes beyond simply establishing the ratio by designing sophisticated trading signal strategies, incorporating both symmetric and asymmetric approaches. These strategies leverage the residual series and conditional variance equations derived from the AR-GARCH model. Throughout the research, a significant emphasis is placed on resource management aspects, such as fund allocation, risk control, and return optimization. The backtesting results reveal that the implemented strategy not only delivers consistent and stable returns but also enhances the efficiency of fund allocation and mitigates trading risks. In essence, this paper contributes novel insights and tangible evidence that can be utilized for optimizing resource management and arbitrage trading strategies in the futures market. Treasury bond futures cross-species arbitrage AR-GARCH model resource management cointegration testing fund allocation. Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-5497178","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":385072000,"identity":"d24b7031-583e-4be1-8dd4-3b371e79e2c9","order_by":0,"name":"Yanbing Cai","email":"","orcid":"","institution":"Shandong Technology and Business University","correspondingAuthor":false,"prefix":"","firstName":"Yanbing","middleName":"","lastName":"Cai","suffix":""},{"id":385072001,"identity":"809179e9-60ba-4679-83b3-378d3a1a3d56","order_by":1,"name":"Liping Hou","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA0ElEQVRIie3RMQrCMBSA4RcKdkmLY0SoJxBSAhWh9C5BiKtjN1sKcam74uAtnCMBu/QAdTM36AEcdBWFZnTIN78f3ksAHOcPUR9A9TSNZn5Zmt4q8QCZQy5YXOuKEcvEY7jVvOjWcoxtkoUX3EggBSqPRgKBLJoXA8myCgWZyNTzp1w+NrBiiRpaTOOExFKM0InvKAHFL1YJlxrD/SoJtkwYVa0m0CHrJOSmyAWNa/5+ZGpzS7NX+knT7dlvjOnzLBpMAD7+gg6OfyWO4zjODy+CCkQ1ExtVdwAAAABJRU5ErkJggg==","orcid":"","institution":"Shandong Technology and Business University","correspondingAuthor":true,"prefix":"","firstName":"Liping","middleName":"","lastName":"Hou","suffix":""}],"badges":[],"createdAt":"2024-11-21 10:53:09","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-5497178/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-5497178/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":72774389,"identity":"c148d972-6f84-430c-958a-95f20f2e3fbe","added_by":"auto","created_at":"2025-01-02 04:17:22","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":533738,"visible":true,"origin":"","legend":"","description":"","filename":"1.pdf","url":"https://assets-eu.researchsquare.com/files/rs-5497178/v1_covered_1422519e-8207-4f04-96b6-d7841393cc41.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Research on Cross-Breed Arbitrage between Five-Year and Ten-Year Treasury Bond Futures Based on AR-GARCH Model.","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Treasury bond futures, cross-species arbitrage, AR-GARCH model, resource management, cointegration testing, fund allocation.","lastPublishedDoi":"10.21203/rs.3.rs-5497178/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-5497178/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper delves into the realm of cross-species arbitrage, specifically examining the relationship between the 5-year treasury bond futures contract TF2309 and the 10-year treasury bond futures contract T2309, along with the corresponding resource management strategy. Utilizing the AR-GARCH model as a foundation, the study employs 1-minute closing price data spanning from May 18, 2023, to July 4, 2023, to conduct a thorough analysis. Initially, the prices of the two futures contracts are subjected to cointegration testing to ascertain their long-term equilibrium relationship, which serves as a crucial step in establishing an arbitrage ratio. Furthermore, the study goes beyond simply establishing the ratio by designing sophisticated trading signal strategies, incorporating both symmetric and asymmetric approaches. These strategies leverage the residual series and conditional variance equations derived from the AR-GARCH model. Throughout the research, a significant emphasis is placed on resource management aspects, such as fund allocation, risk control, and return optimization. The backtesting results reveal that the implemented strategy not only delivers consistent and stable returns but also enhances the efficiency of fund allocation and mitigates trading risks. In essence, this paper contributes novel insights and tangible evidence that can be utilized for optimizing resource management and arbitrage trading strategies in the futures market.\u003c/p\u003e","manuscriptTitle":"Research on Cross-Breed Arbitrage between Five-Year and Ten-Year Treasury Bond Futures Based on AR-GARCH Model.","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2024-12-04 11:28:40","doi":"10.21203/rs.3.rs-5497178/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"91d3a727-4911-49a4-857a-7b5186d5b81a","owner":[],"postedDate":"December 4th, 2024","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2025-01-02T04:09:02+00:00","versionOfRecord":[],"versionCreatedAt":"2024-12-04 11:28:40","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-5497178","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-5497178","identity":"rs-5497178","version":["v1"]},"buildId":"qtupq5eGEP_6zYnWcrvyt","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}