Research On The Deposit Rate Of Margin Based On The Chinese Markt

As a common type of transaction, margin financing has been developed for years in foreign countries. However, it is still new to the Chinese market and has once been prohibit before officially accepted. As the development of the Chinese macket and the full establishment of the financial system, margin financing has now offically launched on China. However, there are still issues regarding to the margin trading business in the Chinese market, among which risk control is one of the most important problems.Since the beginning of the test run, the administrative department has propounded to draw out the margin rule. As the provision of the margin rule, one has to pay a certain percentage of the total transaction amount as a deposit in the process of margin financing in order to deal with the possible losses. The margin rule has set up a barrier for the trading risk of margin financing. However, there is always difficulty to set a suitable amount of the deposit. Either too high or too low set will affect the trading, making it not as smooth. At present, China adopts the deposit with a fixed percentage rule, which has both advantages and disadvantages. Since the margin rule is crucial to the investor and and the stockjobber, it is worth to discuss whether the deposit with a fixed percentage rule will have a positive effect on the Chinese margin finacing system in the long term and whether there is a better way to set a suitable amoung of the deposit.Based on the VaR risk measurement method, this article sets up a most reasonable percentage for the deposit of the margin financing in the Chinese market. In order to achieve the objective, this article employed model analysis using the former data of the stock market, taking consideration the present margin rule, to set up a flexible margin rule. In this model, there is a lowest percentage for the margin deposit everyday. By careful analysis, this percentage can indicate the risk of price changing in the stock market in time and guard against the risk effectively, which is crucial for the risk control to both the investor and and the stockjobber. The precise risk control will also have a positive effect on the healthy development of the stock market.In addition, this article has brought up a suggestion which could be benificial after the establishment of the margin rule-the dynamic risk report system. This system can calculate the risk on the client's account dynamically by using the daily updated data in the market. It can even give proper advices on some decision issues, such as whether the stockjobber should raise the percentage of the deposit and whether a close position should be performed. In this way, this system can keep the risk in control effectively.Due to the limitation of the research method and the dynamics of the market, this study is far from perfect. As a result, this article also brings up some predicitons and suggestions for the future study on the margin financing in the last section, which hopefully can be helpful for the following researches on this issue.