Futures Portfolio Dynamic Margin Set On Time-varying Pair Copula-GAS Models

In this article,we first introduce the margin setting method of domestic and foreign futures contract,especially talk about SPAN system and TIMS system.Then we introduce theories,properties and characteristics of the Copula model,the related Copula function and the application of elliptical Copula family and Archimedes Copula family,Canonical vines,D vine,some common Copula parameter estimation method,and traditional time-variable Copula model.Then this paper focuses on the generalized autoregressive score model(GAS model),and introduce several special forms of the model,new time-varying Copula model derived from this method.At last,we use EGARCH-t model to calculate marginal distribution,Pair Copula-GAS model for capturing time-varying dependence,Monte Carlo simulation method for calculating Value at Risk.An empirical example with future contract yield of gold,zinc and rebar are offered,which have and total 2184 data from July 30,2012 to July 28,2015.First,the basic statistics of the example showed that each assets’ return has volatility clustering and thick tail.Then,we use EGARCH model for calculating marginal distribution,and Canonical vines for Pair Copula decomposition,and use GAS time-varying Copula to describe the dependencies structure between every two futures contracts.At last,for the futures return correlation will fluctuate with market changes,this paper established a time-varying Pair Copula to estimate the portfolio risk value,combined with Monte Carlo simulation method,and calculate VaR,and get the volume of margin,and compare with the constant correlation mode under the Copula method,we can get the advantage and the accuracy of the time-varying Pair Copula-GAS method.