Economy – Quantitative Finance – Risk Management
Scientific paper
2011-03-28
Economy
Quantitative Finance
Risk Management
Scientific paper
Both in practice and in the academic literature, models for setting margin requirements in futures markets classically use daily closing price changes. However, as well documented by research on high-frequency data, financial markets have recently shown high intraday volatility, which could bring more risk than expected. This paper tries to answer two questions relevant for margin committees in practice: is it right to compute margin levels based on closing prices and ignoring intraday dynamics? Is it justified to implement intraday margin calls? The paper focuses on the impact of intraday dynamics of market prices on daily margin levels. Daily margin levels are obtained in two ways: first, by using daily price changes defined with different time-intervals (say from 3 pm to 3 pm on the following trading day instead of traditional closing times); second, by using 5-minute and 1-hour price changes and scaling the results to one day. Our empirical analysis uses the FTSE 100 futures contract traded on LIFFE.
Cotter John
Longin François
No associations
LandOfFree
Margin setting with high-frequency data1 does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.
If you have personal experience with Margin setting with high-frequency data1, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Margin setting with high-frequency data1 will most certainly appreciate the feedback.
Profile ID: LFWR-SCP-O-707759