A Comparative Analysis Of Futures Contract Margins

As an extension of the works by Hartzmark, M. L. (1986)and Gay, G. D. , Hunter, W. C. and Kolb, R. W. (1986) in which the effects of changing margin levels and the link between different futures contract margins were empirically examined on the United States, this paper examined the link between different futures contract margins in China.A two-stage model is developed, in which futures exchanges adjust margin levels to maximize their utilities by balancing income and default cost. The default probability "Z" can be solved from this model. Under certain hypothesizes, different futures contracts have the same "Z". This paper apply two tests on 6 futures contracts, and the hypothesis – 6 futures contracts have the same "z" - is refused, the hypothesis – similar futures contracts have the same "z" - isn't refused.