Study On The Position Limits Design Of Catastrophe Compensation Fund

As a part of the catastrophe compensation fund trading system, the design of the position limit needs to follow the aims of liquidity, security, profitability and fairness. To this end, the paper firstly relies on the theoretical analysis of the relations of position limit and market price fluctuations, liquidity, risk control and other factors. Secondly, according to the Catastrophe Compensation Fund operating mechanism of account design, compensation ratio, and compensation conditions, the maximum quantity of the fund shares can be calculated. And then, considering the catastrophe type, occurrence probability and the maximum loss in different catastrophe area, the author analyzes of the position limits for each registration area. Finally, for these two main transaction participator:individual investors and institutional investors, the author has discussed their positions demand and position objectives first and then designed their position limit, motivation limits and their proportion limit compared to the total limit of different registration area. At last, the total assets ration limit for the institutional investors is also discussed.The setting of position limit is restricted to the compensation ration, compensation conditions, and registration area’s characters of the catastrophe compensation fund, which makes the author deal with the internal mechanism of the catastrophe compensation very carefully. Also, some conclusions have been made.Individual investors held catastrophe Compensation Fund in order to spread catastrophic risk, and their positions are subjected to the value of the properties which are exposure to the catastrophic risk, their disposable incomes and their expectation for the catastrophe. For institutional investors, considering their risk-bearing capacity and market operation ability is necessary. Their determining of building portfolio should ben based on their own characters, regulation requirement, investment objectives, and risk preference. To determine the specific position limits,the application of financial experiment is helpful and needed. And this paper has offered the design of financial experiment some ideas.The study on the position limits design of catastrophe compensation fund in this paper, is expected to make contribution to the foundation of catastrophe compensation fund trading system, also which is what author tries to do.