Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
13460942 | Journal of International Financial Markets, Institutions and Money | 2019 | 15 Pages |
Abstract
We examine the effects of different margin strategies on the loss distribution of a clearing house during various crises of different stock price trends, volatility expectations, bid-ask spreads, and funding liquidity. We simulate a hypothetical clearing house active on the US stock futures market 2008-2015, investigating its micro-level stability. We find that it might be optimal to replace the strict risk-sensitive margin strategy by more anti-cyclical ones. The extreme anti-cyclical strategy (full smoothing), however, was suboptimal on this sample. Our results may help institutions elaborate their margin strategies to develop risk management systems in line with new regulations.
Keywords
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Economics, Econometrics and Finance
Economics and Econometrics
Authors
Edina Berlinger, Barbara Dömötör, Ferenc Illés,