This article proposes two value-based standards for setting the initial margin requirements on futures positions based on the observation that the distributions of the payoffs to futures traders and the potential losses to the futures clearinghouse can be described in terms of the payoffs to barrier options. Using both margin standards, we examine the adequacy of initial margin requirements in the crude oil futures market. Our results suggest that, on average, the initial margin requirements set by the New York Mercantile Exchange exceed the minimum margins required under our option-based standards for adequacy.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 77 (2004) Issue (Month): 1 (January) Pages: 101-136 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)