Margin Setting to Short and Long Futures Contract Positions by Coherent Risk Measures
Abstract
This study, using gold coins spot price returns, in the period from 2008to 2016, estimates and compares IME gold coin futures contracts short and long positions Initial margin by coherent risk measures, specially Expected Shortfall and spectral risk measures.GARCH, EGARCH and GJR GARCH used for volatility process modeling. Fore moles back-test, it applies Christophersonconditional coverage likelihood ratio (LRcc) test and Lopez and Blanco-Ihel loss functions, and Fore ES models Evaluations uses MAE and RMS Eloss functions. The paper finds that, GJRGARCH has outperformed the other models that support the asymmetric response of gold coins price to positive and negative shocks. The average margin estimated for short positions with all risk measures, is significantly larger than long positions that confirm asymmetric response of gold coins price to positive and negative shocks.
Keywords:Â Blanco-Ihel Back test, EGARCH, Expected Shortfall, Exponential Spectral Risk Measure, Margin, Margin Setting.
References
AbdehTabrizi H, Radpour M (2009) Measuring & Market Risk management: Value At-risk attitude. Tehran: Agah Press
Mohammadi T, Nassiri S (2010) Comparing of Riskmetric& GARCH models in estimation of total output fluctuations at Tehran Stock Exchange. Financial Studies Magazine, 6,95-118.
Hull J (1993) Options, futures and other derivatives. New Jersey: Prentice Hall.
Broussard JP (2001) Extreme-value and margin setting with and without. The Quarterly Review of Economics and Finance, 41,365-385.
Longin F M (1999) Optimal Margin Levels in Futures Markets: Extreme Price Movements. Journal of Futures Markets, 19,127-152.
RahnamayRoudposhti F, NikooMaram H ToloeiOshlaghi A, Hussein ZadehLotfi F, Bayat M (2015) Optimization of Portfolio based upon fixed model and classic optimization, Financial Engineering & Management of Stock Notes Magazine, 23, 29-59
Hsieh DA (1991) Chaos and Nonlinear Dynamics: Application to Financial Markets. Journal of Finance, 46, 1839-1877.
Cotter J (2001) Margin Exceedances for European Stock Index Futures using Extreme Value Theory. Journal of Banking and Finance, 25, 1475-1502.
Knott R, Polenghi M (2006) Assessing central counterparty margin coverage on futures contracts. London: Bank of England.
Cotter J, Longin F (2004) Margin requirements with intraday dynamics. Working paper.
Dowd K, Cotter J, Sorwar G (2008) Spectral Risk Measure: Properties and Limitation. Nottingham.
Cotter J, Dowd K (2006) Spectral Risk Measures with an Application to Futures Clearinghouse Variation. Dublin: University College Dublin. School of Business. Centre for Financial Markets.
Varma JR (2009) Risk Management Lessons from the Global Financial Crisis for Derivative Exchanges. Working paper.
Heller D, Vause N (2012) Collateral Requirements for Mandatory Central Clearing of Over-the-Counter Derivatives. BIS Working Paper 373.
Garcia CC, Henrard M, Macrina A (2016).Estimation of Future Initial Margins in a Multi-Curve Interest Rate Framework. London, WC1E 6BT, United Kingdom.
Fallah J (2014) Any effects of changes of margin setting on market of gold coin future contracts at Iranian Stock Exchange. Tehran: PhD. Thesis (Non-published). Islamic Azad University, Research Sciences Branch.
Karimi S (2012) Calculation of margin setting of future gold coin contracts by the use of Conditional Value Theory. Tehran: Master of Science Thesis (Non-published), Sharif University
Žiković S (2008) Friends and Foes: A Story of Value at Risk and. Dubrovnik: 14 Dubrovnik Econometric conferences.
French KR, Schwert GW, Staumbaugh RF (1987) Expected Stock Returns and Volatility. Journal of Financial Economics, 19, 3-29.
Glosten LR, Jagannathan R, Runkle DE (1993) On the Relation between the Expected Value and the Volatility of the Nominal Excess Return on Stocks. Journal of finance, 5, 1779-1801.
Mahdavi GH, Majedi Z(2010) Applying of Kerangini Theory in estimation of value at-risk : Case study: Responsibility insurance of Iran Insurance Co.Statistical Sciences Magazine, 1,59-76
