Var Method Based On Extreme Value Theory, Stock Index Futures Margin

Along with economic globalization and financial integration, the global financial environment and financial markets have undergone major changes, so financial markets have been more volatility and financial risk also increases. As a financial instrument which can be used to invest and hedge risk, Stock Index Future gives a way to hedge risk for market participants, and it has developt rapidly since issued in 1982. An important feature of the futures market is the margin system, and it's core is the determine of the margin level, which has a direct impact on the effectiveness of deposit systems. In our country, a Stock Index Future has been issued just recently, and the magin level is setted as a certain proportion of the contract value, which has no direct correlation with change of the price. From the perspective of controlling transaction risk, the fixed margin level is always too high or too low. But the higher the magin level is setted, the more the cost of transaction is. Also, the high magin level is harmful for the using of resources. Conversely, if the proportion is too low, it would increase the market volatility and risk. Therefore, it is necessary to establish a dynamic model with Chinese characteristics, based on the fluctuation of futures price, to set margin level. The model can forecaste the margin level sensitivily. It may formulate reasonable margin level according to different risk degrees.The risk, which Stock Index Futures covers, meas the profits or losses under the futures positions held in normal status. And Value at Risk (VaR) method is to estimate the greatest possible amount of the losses in normal circumstances, so VaR is in line with requirements. Based on extensive applicability of GARCH models and the Extreme Value Theory(EVT), this paper adopts the VaR method, which combines GARCH models with Extreme Value Theory, to design benchmark margin level of Stock Index Futures.This paper firstly introduces calculation principles and VaR methods systematically. Next, empirically analyses the nature of Stock Index Futures daily return, and choose GARCH models and Extreme Value Theroy to analyse Stock Index Futures volatility. At last, we have a conclusion:the method of combining GARCH model with Extreme Value Theroy predicts price fluctuation of Stock Index Futures accurately, which provides a reference idea for setting margin level of Stock Index Futures.