Setting futures margins: the extremes approach
Using a cost minimizing approach it can be shown that futures margins are set optimally when the cost rate induced by the margin equals the probability of default. Empirically this implies that extreme value analysis should be used since cost rates are, most likely, very small. Application of this approach to NYSE composite futures for the period 1982-1990 shows that actual margins are too invariable and too low, especially before the stock market crash of October 1987.
If 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.
Volume (Year): 9 (1999)
Issue (Month): 2 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAFE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAFE20|