title: Establishing an index arbitrage model by applying neural networks method--a case study of Nikkei 225 index.
abstract: This paper applies the neural network method to establish an index arbitrage model and compares the arbitrage performances to that from traditional cost of carry arbitrage model. From the empirical results of the Nikkei 225 stock index market, following conclusions can be stated: (1) The basis will get enlarged for a time period, more profitability may be obtained from the trend. (2) If the neural network is applied within the index arbitrage model, twofold of return would be obtained than traditional arbitrage model can do. (3) If the T_basis has volatile trend, the neural network arbitrage model will ignore the peak. Although arbitrageur would lose the chance to get profit, they may reduce the market impact risk.
authors.affiliation: Institute of Information Management, National Chiao Tung University, 1001 Ta Hsueh Road, Hsinchu, Taiwan 300, ROC.
authors.forename: A P
authors.initials: AP
authors.lastname: Chen
authors.forename: C Y
authors.initials: CY
authors.lastname: Chianglin
authors.forename: H P
authors.initials: HP
authors.lastname: Chung
mesh_terms: D003198:Computer Simulation; D001330:Electronic Data Processing; D005069:Evaluation Studies as Topic; D006801:Humans; D040541:Marketing; D015233:Models, Statistical; D016571:Neural Networks, Computer; D012196:Review Literature as Topic; D013997:Time Factors