Study On Large Price Movement Behavior And Price Limits Of Commodity Futures Markets In China Based On EVT

Return plays a great role in guiding the rational investments forinvestors. Huge fluctuations in the prices of financial assets, such as bigprice movements of futures prices, is reflected by extreme return which isdecided by the tail characteristics. Therefore, studying the tailcharacteristics of distribution is practically important. Because extremevalue theory has advantages in dealing with extreme circumstances, weuse it to study the big price behavior of China's commodity futures, andwe use it as the basis for further study and evaluation of China's futuresprice limits on the extreme value theory. The paper analyzes the largeprice movement of the commodity futures market in China inspace-dimension and time-dimension by hard copper, wheat and soybeanfutures as examples. In the space-dimension, it mainly studies the stabledistribution characteristic and tail distribution of the futures returns; in thetime-dimension, it mainly studies time interval distribution of large pricemovement. By empirical studies, this paper attempts to further study therobustness of extreme value theory on commodity futures large pricesfluctuations and the margin probability of default under the influence ofprice limit.The empirical results shows: (1) In the space-dimension, the futuresreturns of the three kinds of futures all have the characteristic of stabledistribution. By getting four stable distribution parameters, the "fat tail"characteristic of the futures returns is proved. Furthermore, the paperapplies the methodology including the fully parametric models of Peaks-over-threshold models and ME-plot method for estimating models.The estimators are calculated to describe the distribution of the tails of thefutures returns by testing the left tails and the right tails of daily returns ofthese three kinds of futures. (2) In the time-dimension, the paper finds theinterval between two large price movements of three kinds of futures donot serve nearly exponential distributions with various parameters ifreturns over 2%, 3% and so on. (3) There are significant differences inparameter estimates, and EVT can accurately catch margin probability ofdefault under the influence of price limit. (4) Combined with pricelimitation of commodity futures, it can significantly reduce the margins,and effectively reduce the risk of the futures market. Price limitation ofcommodity futures in China has a positive impact.