An Estimation Model for Futures Contract Margin Requirements PDF Download
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Author: Betsey Epstein Kuhn
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 300
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Author: Betsey Epstein Kuhn
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 300
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Author: John Gerard Shane
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 378
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Author: Raymond Knott
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author:
Publisher: Lulu.com
ISBN: 9291316695
Category : Bank capital
Languages : en
Pages : 294
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Author: Ya Cai
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Traders in futures markets are required to deposit initial margin requirements for their open futures positions and maintain minimum margin requirements for these open positions. Futures exchanges set these margin requirements and require higher margin requirements for more volatile contracts. It has been argued that futures exchanges may use changing margin requirements to control the volatility of futures contracts and this question is still of interest. To address this question, I investigate the relationship between margin changes and futures price volatility for 24 different futures contracts, which include contracts on agricultural commodities, livestock, equity indices, interest rate and foreign currency. I provide evidence using univariate tests that the futures price volatility is significantly reduced following margin increases, while the futures price volatility increases but to a lesser extent following margin decreases. A regression analysis shows that larger margin changes have a greater negative effect on the futures price volatility. This relationship holds for the different futures contracts. Finally, it may be argued that margin requirements and futures price volatility are endogeneous variables. To address the potential presence of endogeneity, I employ the instrumental variables technique along with two stages least squares estimation and find that the inverse relationship between margin changes and volatility still holds.
Author: Peter Caspers
Publisher:
ISBN:
Category :
Languages : en
Pages : 36
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The introduction of mandatory margining for non-cleared portfolios has major implications for the pricing and risk measurement of OTC derivatives. In particular, a model for estimating future initial margin requirements is necessary to enable the calculation of pricing adjustments (MVA), net counterparty credit exposures and credit capital (RWA). Existing literature on the topic suggests a model which makes use of regression techniques, but little detail is available on the predictive quality of these models within a Monte Carlo simulation framework. We review these regression-based initial margin models in detail and compare their output against the actual margin requirements measured by the ISDA SIMM methodology. We observe that the models generally perform well for single trades but show some degradation for single option products and larger diversified portfolios. We investigate potential extensions and improvements to the model, along with examining some additional “conservatism” features that may have application in the context of credit exposure measurement. The Initial Margin modelling approaches discussed here are similarly applicable to centrally cleared or exchange-traded portfolios.
Author: Sergio H. Lence
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This study shows how the standard portfolio model of futures trading should be modified when there is less than perfect information about the relevant parameters (estimation risk). The standard and the optimal decision rules for futures trading in the presence of estimation risk are compared and discussed. An operational model of futures trading for use under estimation risk is advanced. In the presence of relevant prior and sample information, the model can be used to optimally blend both types of information.
Author: Leanne J. Ussher
Publisher:
ISBN:
Category :
Languages : en
Pages : 446
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Author:
Publisher:
ISBN:
Category : Commodity exchanges
Languages : en
Pages : 534
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Consists of the proceedings of seminars on futures markets held by the Chicago Board of Trade.
Author: International Accounting Standards Board
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 104
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