Examining the Consistence of Futures Margin Levels using Bivariate Extreme Value Copulas

X. Gong, H. T. Nguyen, V. Kreinovich, S. Sriboonchitta

Abstract


This study examines the consistence of the futures margin levelsof dierent commodities and combinations in the CME group by Extreme ValueCopula (EVC).We nd that if we ignore the co-movements of the commodities, themargins become consistent with each other, and the margin violation rates hoveraround 0.5%. However, if we consider the co-movement of the related commoditiesusing EVC, the margin levels are found to be not consistent anymore, especially inthe combinations of strongly related commodities which are in the same category.Therefore, we suggest that the CME group should try to harmonize the marginspolicy with respect to the dependence between the futures in the future.

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The Thai Journal of Mathematics organized and supported by The Mathematical Association of Thailand and Thailand Research Council and the Center for Promotion of Mathematical Research of Thailand (CEPMART).

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|ISSN 1686-0209|