The Dynamic Margin System Design Of Margin In VaR Method

Margin trading is called security deposit trading in the West. It’s a regular trading system of financial markets in the developed world. But in China, the margin trading business has only existed for four years, a variety of institutional building and reform need to be done. Design of margin is one of the most important issues.Lending relationship is the basic relationship between securities companies and customers. On the one hand, margin is the collateral to securities firms, which to hedge price fluctuations of underlying securities. On the other hand, the margin is a source of financial leverage. So, appropriate margin is favorable to the development of margin trading. Unified higher margin rate is set by regulators when introducing the margin for the purpose of protecting China’s capital market,. With the expansion of business scale, such way seems to be improper.In this paper, VaR methods, combined with the unique operating rules and risk factor of margin trading system, are used to set up a margin trading system for China. The history, and characteristics are described and analyzed in detail in the second chapter,also the shortcomings of the existing policy are discussed. The third chapter introduces the theory and methods of VaR, the relevant model and calculation methods. In the fourth chapter, three requirements of the design of the financing margin are proposed. Through selection of historical data, using VaR-GARCH model, a detailed, real-time dynamic margin system is developed. Through testing, this design of the margin of this paper can effectively isolate the risk, lower cost, easy to operate.Due to limited conditions, the model requires certain assumptions and the market environment needs to meet some requirements. In chapter 5, in order to cooperate with the smooth functioning of the dynamic margin system in the capital market, we make a number of suggestions and supporting measures to the better development of the margin trading market.