The Study Of Price Limits In Futures Margin Level Settings

It is a very important issue for the futures clearinghouse to design the appropriate margin because the operation of the whole futures markets is dependent upon the margin mechanism. The setting of appropriate futures margin must both consider the probability of default risk and the liquidity of the futures markets. Extreme value theory has recently been applied to margin settings in futures markets. Price limits, however may undermine the benefits associated with the extreme-value method. This has not to be accomplished in the literature. The purpose of this paper analysis the price limits on futures price volatility according to the specific situation of the China's Commodity Futures Markets. I use the Shanghai Futures Exchange Shanghai copper futures, soybean futures in Dalian Commodity Exchange and Zhengzhou Commodity Exchange of hard wheat futures trading Data of the launch of Price Limits on Futures Margin set Empirical Study of the impact. I found that futures price limits cut off the extreme behavior of price changes days, so the distribution of futures returns kurtosis slow, on the extreme value distribution parameter estimation, less than the probability of margin estimates and margin settings have affected the ratio. In addition, futures price limits and margin for the futures price volatility have lower substitution effect, narrow small price limits reduce the volatility of futures prices to help control the futures of default risk, it is necessary to lower the relative demands of margins. This result may explain why the Exchange set the margin lower than the theoretical value, because they all match the price limit system.This paper is divided into five chapters.The first chapter is an introduction. It introduces the research background and significance of futures margin, and studies abroad to do more comprehensive comments, points out the importance and necessity of the study, outlined the framework of this study, research methodology and the main content.The second chapter introduces the configuration model of futures margin associated with the extreme value theory model, combined with China's current futures price limits for risk control analysis related to extreme value theory model, a set margin levels for our models. The third chapter is a price limit in the Chinese commodity futures market price fluctuations of the impact analysis. I found that price limits may be truncated extreme futures price changes, which will reduce the futures price discovery.The Chapter Four is a combination of China's commodity futures market data, the use of extreme value theory of price limits set on the margin impact of the level of empirical analysis, and futures returns extreme distribution parameter estimation and testing of futures price limits set of futures margins, test loose with the narrow margin setting price limits on the impact to reach appropriate conclusions.The final chapter is the conclusion of the study of innovation and prospects.