Price Volatility and Futures Margins
AbstractFutures exchanges raise margins in environments characterized by recent substantial increases in futures price volatility, and they raise margins in contracts that have recently shown the largest volatility increase. Volatility then tends to fall. This reduction is smaller - especially the troublesome jump component of volatility that is derived from a Poisson jump-diffusion process of futures daily returns - when the earlier margin increase is larger. The exchanges appear to raise margins when they perceive the earlier volatility increase to be more permanent. Conversely, exchanges reduce margins after an earlier decrease in volatility, but they seem anxious to reduce margins well before volatility has bottomed out. After the margin reduction, volatility continues to decline and by a greater amount for the cases when the earlier reduction in margins was larger.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1263.
Date of creation: Nov 1995
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Paul Kupiec, 1998.
"Margin Requirements, Volatility, and Market Integrity: What Have We Learned Since the Crash?,"
Journal of Financial Services Research,
Springer, vol. 13(3), pages 231-255, June.
- Paul H. Kupiec, 1997. "Margin requirements, volatility, and market integrity: what have we learned since the crash?," Finance and Economics Discussion Series 1997-22, Board of Governors of the Federal Reserve System (U.S.).
- Paul H. Kupiec, 1997. "Margin Requirements, Volatility, and Market Integrity: What Have We Learned Since The Crash?," FMG Special Papers sp97, Financial Markets Group.
- Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010.
"The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?,"
Applied Economic Perspectives and Policy,
Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.
- Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2008. "The Adequacy of Speculation in Agricultural Futures Markets:Too Much of a Good Thing?," 2008 Conference, April 21-22, 2008, St. Louis, Missouri 37615, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
- Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2008. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Marketing and Outlook Research Reports 37512, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.