TITLE:
Research on Hedging Strategies for the CSI A500 Index from the Perspective of Combined Futures Hedging
AUTHORS:
Zhilan Liu, Enqi Liu, Lei Chen
KEYWORDS:
CSI A500 Index, Combined Hedging, Optimal Hedge Ratio, Hedging Performance
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.15 No.1,
March
18,
2026
ABSTRACT: In September 2024, China launched the CSI A500 Index, which quickly gained popularity among investors. However, the risks faced by investors still need to be effectively mitigated through futures hedging strategies. The CSI A500 Index features a distinctive constituent structure of “large-cap core + mid-cap leaders”, which is highly correlated with both the CSI 300 and CSI 500 indices, providing a practical basis for implementing a combined hedging strategy. In the absence of a stock index futures contract directly linked to the CSI A500 Index, this paper primarily constructs a dual-futures combined hedging strategy using CSI 300 Stock Index Futures (IF) and CSI 500 Stock Index Futures (IC), and examines whether this combined strategy significantly outperforms single-futures cross-hedging strategies that rely only on IF or IC. Using high-frequency 1-minute data and daily data from September 23, 2024 to December 26, 2025, we estimate and compare the optimal hedge ratios and hedging performance of three strategies (single IF, single IC, and the IF + IC combination) based on Ordinary Least Squares (OLS) and an Error Correction Model (ECM). The findings are as follows: 1) both single-futures and dual-futures hedging strategies can significantly reduce the price volatility risk of the CSI A500 Index, confirming the feasibility of futures-based hedging; 2) in most cases, the dual-futures combined strategy, especially under the ECM that incorporates long-run equilibrium relationships, delivers superior and more robust risk-hedging performance (higher VRR with lower variability) than single-futures strategies; 3) CSI 300 Stock Index Futures serve as the core hedging instrument for the A500 Index, and adding CSI 500 Stock Index Futures effectively hedges residual structural risk. These conclusions not only validate the central hypothesis, but also provide investors holding CSI A500-related assets with a more refined and robust risk management framework.