Study On China Commodity Futures Margin Setting

This paper begins with margin settings, which is one of the risk management of the commodity futures exchange. First,the paper introduces the current widely used margin setting systems: system based on the VaR and SPAN. And then studies the risk measurement method VaR, including its calculation method, application range and so on. Then discusses how to use the VaR to provide reference standard of the margin level. There are many methodologies available to calculate VaR: the parameter method, Monte Carlo simulation method and historical simulation method. In the method of parameter, the researchers usually use GARCH model, and a few kinds of variants of the GARCH model, because it is a good way to depict the peak of financial time series’ s thick tail and leveraged. This paper select the daily trading data of cotton futures from zhengzhou Commodity Exchange, getting the daily yield sequence. Then we get the volatility sequence by applying the GARCH model and the VaR volatility. This can help to construct the dynamic margin system. With the historical simulation method we analyze the three level of corresponding yields of VaR. In the Monte Carlo method, we failed to get good results by using the geometric Brown motion to describe the futures closing price. Then using common analysis method,we get different data by time to the delivery month. Compared with zhengzhou Commodity Exchange margin level, make the evaluation.