Empirical Study On The Margin Institution Of China’s Commodity Futures Market

Commodity futures market in China is currently using the static margininstitution.The defects of the static margin system is obvious.Because it doesnot take into account the fluctuations of the futures contract price and otherfactors changes in the futures market. Thus, it can not well compensate for therisk that caused by the fluctuation of the contract price.While the internationalmature futures markets usually use the dynamic margin institution.It adjusts themargin level along with the change ane the volatility of the futures price.So itcan capture the change of market risk caused by the change of futures price.This paper takes the Shanghai fuel futures contract, the copper futurescontract and the Dalian soybean oil futures contract as the research object.First,evaluate and analyze the static margin system now used by them. Second, usethe La-VaR model and the CVaR model to carry on the empirical analysis,andcompare it with the empirical results of using the conventional VaR model, theEWMA model used by Hongkong futures market model, the risk factor modelused by Taiwan futures market, the SPAN system used by the United Statesfutures market.The results show that for the copper futures contract,the La-VaRmodel is the best in control the risk and reduce the cost.While,the CVaR modelis the best for the fuel futures contract and the soybean oil futures contract.Finally,we use the event study method to study the risk impact in the futuresmarket caused by the margin level adjustment.This can further prove that thedynamic margin system is feasible.