China Hog Futures Margin

Margin mechanism is one of the important ways of risk managementin futures market, called "the first threshold". As futures market in Chinais in leading strings, there are no effective mechanisms in controllingmarket risks, how to set reasonable margin level has a great significance.At present, we have been advancing the process of researching newfutures contracts, margin mechanism study reflects the level of futuresexchanges to control the risk directly. China has been playing a key rolesin the world hog industry, the conditions of trading hog futures contractin the futures market have been grown up, as to be the first livestockfutures contract in China, its margin level is crucial.Above all, this article analyses some theories of the marginmechanism, especially the setting models and those applications, andchooses the GARCH-VaR models as the setting model of the hog futurescontract in our futures market. Then, it introduces the development ofhog futures in Chicago Mercantile Exchange and investigates theStandard Portfolio Analysis of Risk (SPAN) detaitedly. Next, itintroduces the present method of setting margin level in China and pointsout that we should learn the advance experience in risk management inthe world and import SPAN margin system step by step.At last, based on the real conditions in our hog market and the firstdesign thinking of hog futures contract in Dalian Commodity Exchange,the author takes "two steps" strategy to set its margin level: firstly,static margin setting method; secondly, using the GARCH-VaR model toadjust margin dynamically.