IDEAS home Printed from https://ideas.repec.org/a/taf/reroxx/v36y2023i2p2136228.html
   My bibliography  Save this article

Can jumps improve the futures margin level? An empirical study based on an SE-SVCJ-GPD model

Author

Listed:
  • Yan Chen
  • Lei Zhang

Abstract

In addition to the characteristics of leptokurtic fat-tailed distribution, financial sequences also exhibit typical volatility and jumps. Moreover, jumps exhibit self-exciting and clustering characteristics under extreme events. However, studies on dynamic margin levels often ignore jumps. In this study, we combine the self-exciting stochastic volatility with correlated jumps (SE-SVCJ) model with a generalized Pareto distribution (GPD) to measure the optimal margin level for the stock index futures market. Value at risk (VaR) is estimated and forecasted using the SE-SVCJ-GPD, SVCJ-GPD, and generalized autoregressive conditional heteroskedasticity with GPD (GARCH-GPD) models. SE-SVCJ-GPD can undertake more risks in the long or short trading position of stock index futures contracts. Moreover, the backtesting experiment results show that the SE-SVCJ-GPD model provides a more accurate margin level forecast than the other methods in both positions. This study’s findings have practical significance and theoretical value for assessing the level of risk and taking corresponding risk-prevention measures.

Suggested Citation

  • Yan Chen & Lei Zhang, 2023. "Can jumps improve the futures margin level? An empirical study based on an SE-SVCJ-GPD model," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 36(2), pages 2136228-213, July.
    • Handle: RePEc:taf:reroxx:v:36:y:2023:i:2:p:2136228
    DOI: 10.1080/1331677X.2022.2136228
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1331677X.2022.2136228
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1331677X.2022.2136228?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:reroxx:v:36:y:2023:i:2:p:2136228. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rero .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.