Setting the futures margin with price limits: the case for single-stock futures

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• 作者：Chen-Yu Chen ; Jian-Hsin Chou ; Hung-Gay Fung…
• 关键词：Censoring method ; Margin requirement ; Price limits ; Single ; stock futures
• 刊名：Review of Quantitative Finance and Accounting
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：48
• 期：1
• 页码：219-237
• 全文大小：
• 刊物类别：Business and Economics
• 刊物主题：Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory;
• 出版者：Springer US
• ISSN：1573-7179
• 卷排序：48

文摘

Price limits are artificial boundaries established by regulators to establish the maximum price movement permitted in a single day. We propose using a new censoring method that incorporates the effect of price limits on the futures price distribution and investigates how to set an appropriate daily margin level using single-stock futures in Taiwan. We compare our estimations with those obtained using the method in Longin (J Bus 69:383–408, 1999). The results show that (1) the margin levels derived from the Longin method, which ignore price limits in the estimation, are lower than those in our censoring method; and (2) the legal margin for single-stock futures set at 13.5 % by the Taiwan Futures Exchange to avoid default risk appears to be too high.