How To Determine The Reasonable Margin Level

Physical oil trading margin level is an important factor influencing petrol spot transaction efficiency and security, and is thus reputed as the first defense line against transaction market risk. At recent stage, the margin levels of the spot petro transaction exchanges vary. The margin level shall be set by taking into consideration both controlling default risk and reducing transaction cost, to achieve an effective combination between transaction risk and cost. Therefore, it is essential to select an appropriate margin level.Va R method has been set in the thesis as an important basis for dynamic setting spot petrol market margin level, aiming to reduce the transaction cost and enhance active transaction while controlling transaction risk. By means of the most common historical simulation and Monte Carlo simulation methods, the thesis has made an estimate on the Va R value on the next transaction date, with the settlement prices of the past 377 transaction days of spot petro 93# gas(ton) and 728 transaction days of the American west Texas intermediate crude oil futures(continuous) as the sample data.The day logarithm yield of the data demonstrated in the thesis is not in normal distribution, but with a peak feature. Therefore, T distribution is chosen for matching. According to the research, the T distribution matching has a better effect as the randomly disturbeddistributional assumption in movement simulation with 4.5 degree of freedom. By comparing the Va R values calculated through these two methods, it can be noticed that the historical simulation method can produce a smaller Va R value, therefore, the calculated Va R value is likely not to cover all the risks; while the Va R value calculated from Monte Carlo simulation, as the reference for spot petrol market margin, can be a better choice to balance the default risk and transaction risk.Currently, the spot petrol market margin for 93# gas(ton) is at 5% in our country. If the margin keeps at 5% under 95% confidence level, both the conclusions drawn from the two calculation methods do not have warehouse-wearing risk, and thus there is no need to adjust the margin level. However, if the margin level keeps at 5% under 99% confidence level, there will exist warehouse-wearing risk in the conclusions and the margin level needs further enhancement.