Spectral Risk Measures with an Application to Futures Clearinghouse Variation Margin Requirements
نویسندگان
چکیده
This paper applies an AR(1)-GARCH (1, 1) process to detail the conditional distributions of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses the conditional distribution for these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar VaR and Expected Shortfall (ES) measures of risk, and also compares the precision and discusses the relative usefulness of each of these risk measures in setting variation margins that incorporate time-varying market conditions. The goodness of fit of the model is confirmed by a variety of backtests.
منابع مشابه
Extreme Spectral Risk Measures: An Application to Futures Clearinghouse Margin Requirements
This paper applies the Extreme-Value (EV) Generalised Pareto distribution to the extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses tail estimators from these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar Va...
متن کاملA Theoretical Framework to Evaluate Different Margin-Setting Methodologies: with an Application to Hang Seng Index Futures
The margin system is a clearinghouse’s first line of defense against the default risk. From the perspectives of a clearinghouse, the utmost concern is to have a prudential system to control the default exposure. Once the level of prudentiality is set, the next concern is the opportunity cost to the investors. It is because high opportunity cost discourages people from hedging futures and thus d...
متن کاملMargin Requirements for Future Clearinghouses: Some Extreme-Value Risk Measures
This paper applies the Extreme-Value (EV) Generalised Pareto distribution to the extreme tails of the return distributions for the S&P500, FT100, DAX, Hang Seng, and Nikkei225 futures contracts. It then uses tail estimators from these contracts to estimate spectral risk measures, which are coherent risk measures that reflect a user’s risk-aversion function. It compares these to more familiar Va...
متن کاملOptimal clearing margin, capital and price limits for futures clearinghouses
We provide a model for a futures clearinghouse to use for setting optimal levels of clearing margin, capital and price limits, which minimizes the costs to clearing firms and simultaneously protects the clearinghouse from default by clearing firms. We show how to estimate the capital requirement, which supports the clearinghouse s residual default risk that is not covered by the clearing margin...
متن کاملA Theoretical Framework to Evaluate Different Margin - Setting Methodologies
The margin system is the clearinghouse’s first line of defense against default risk. From the perspectives of a clearinghouse, the utmost concern is to have a prudential system to control the default exposure. Once the level of prudentiality is set the next concern of the clearinghouse is overcharge. It is because higher is the overcharge, greater is the investor’s opportunity cost of investing...
متن کامل