Studies On Margins And Price Limits In Taiwan's Stock Index Futures Market

Price limits is the most widely used in stock market as a price stabilization mechanism.The research on price limits originated from futures contracts. In futures trading, the margin system is also a very important system. As a guarantee of futures contracts'performance,the margin plays an important role in normal operation to protect the futures market. Taiwan's futures market,from scratch to fast development,is a successful market of gradually opening to the outside.It is similar with the mainland financial market in many aspects,for example,hedge demand for investors,regulatory system, the micro structure and cultural factors. Therefore,in the initial stage of introduction of stock index futures in the mainland, we hope the research on Taiwan's stock index futures on margin and price limits can have reference for the mainland stock index futures.This study extends the framework of Brennan (1986) to find the cost-minimizing combination of spot limits, futures limits, and margins for stock and index futures in the Taiwan market by selecting sample of spot and futures market data and analyzing empirically.