A Study On Margin Models Forcommodity Futures

Margin is the core of risk management in futures market. Steel industry is one of the key industries of national economy and ribbed bar is most important steel raw materials. With the fast development of globalization, the role of our steel industry plays in the world is more and more important. The margin requirement of ribbed bar futures contract should be set not only for the sake of risk control but also the market liquidity.This paper is based on the research on the RB futures contract listed by Shanghai Futures Exchange with several margin setting models such as absolute value of RR, OHLC and EWMA. According to the research on the difference of these margin setting models, the paper has found some conclusion as follows:Firstly it is shown that EWMA is more suitable for current situation of domain futures market because of the futures exchanges care for both risk management and market liquidity.Secondly it is shown that current margin requirement for RB contract is too high to keep the market liquidity. And when the market is in financial crisis, the price volatility will be too high that current margin rates can not prevent the market from default risk.According to the problems above, the paper tries to suggest that exchanges in our country should use more flexible margin requirement. The innovation of the paper lies in deep research on the setting models of margin requirement.