Research On Dynamic Margin Setting Model Based On China’s Cotton Futures

At present,China’s futures market adopts the static margin system.This way of collecting margin in a fixed proportion can better cope with risks in the early stage of China’s futures market.However,with the rapid development of China’s futures market,the static margin system is facing the problems of rigid mechanism and high setting proportion,which affects the fund use efficiency of traders to a certain extent.The internationally mature futures exchanges mostly use the dynamic margin system,which has certain advantages.Therefore,the research on the dynamic margin setting method provides some reference suggestions for the benign development of China’s futures margin system.This paper combines theoretical research with empirical analysis.In the theoretical part,it introduces the basic principles and calculation methods of five dynamic margin models: Delta-normal distribution model,GARCH-VaR model,GARCH-CVaR model,historical simulation method and GARCH-POT model.In the empirical part,this paper selects the closing price data of cotton futures contract,constructs the above five dynamic margin models,and using Kupiec back test method to compare and analyze the prediction results of the model under different confidence levels and time windows.The empirical results show that the length of time window has a great impact on the VaR based on Delta-normal distribution model and historical simulation method.The shorter the time window,the more sensitive the VaR curve changes.Because GARCH model can well describe the peak and thick tail of commodity futures yield,at this time can better fit the change of yield.Generally speaking,it is the best to set dynamic margin based on GARCH-CVaR model and GARCH-POT model.GARCH-CVaR model can predict better when the confidence level is high,and GARCH-POT model can predict better when the time window is long.Based on the model,this paper further puts forward the theoretical method of safety cushion,so that the exchange can adjust the margin level when extreme risks occur.