Stock index futures: the case of the FCE on CAC40.

Summary The CAC40 index is the first thing you think of when you talk about the stock market in France. However, it is not tradable. This is why derivative contracts have appeared such as the FCE future contract whose underlying is the CAC40 which can be bought and sold. Their values are very close but not equal. So what is the relationship between the FCE contract and the CAC40? With the help of data that can be downloaded daily from the Internet and accessible to everyone, an answer will be given. In the first part we present the CAC40 futures contract, the reasons for trading it and compare it to other stock index futures contracts in the world. We then study the FCE/CAC40 relationship in terms of informational efficiency. To do so, we will study different basic notions and try to model them. Finally, in a last part, we study this same relationship from a microstructure point of view, by studying in particular non-price variables (volume and open position), and volatility. We will finally try to model the volatility as a function of these variables.