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Minimum capital requirement calculations for UK futures

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  • John Cotter

Abstract

Key to the imposition of appropriate minimum capital requirements on a daily basis is accurate volatility estimation. Here, measures are presented based on discrete estimation of aggregated high‐frequency UK futures realizations underpinned by a continuous time framework. Squared and absolute returns are incorporated into the measurement process so as to rely on the quadratic variation of a diffusion process and be robust in the presence of fat tails. The realized volatility estimates incorporate the long memory property. The dynamics of the volatility variable are adequately captured. Resulting rescaled returns are applied to minimum capital requirement calculations. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:193–220, 2004

Suggested Citation

  • John Cotter, 2004. "Minimum capital requirement calculations for UK futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 24(2), pages 193-220, February.
    • Handle: RePEc:wly:jfutmk:v:24:y:2004:i:2:p:193-220
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    Cited by:

    1. John Cotter & Francois Longin, 2011. "Margin Requirements with Intraday Dynamics," Working Papers 200519, Geary Institute, University College Dublin.
    2. Don Bredin & John Cotter, 2008. "Volatility And Irish Exports," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 540-560, October.
    3. Cotter, John, 2004. "Absolute Return Volatility," MPRA Paper 3530, University Library of Munich, Germany, revised 2005.
    4. Cotter, John & Longin, Francois, 2004. "Margin setting with high-frequency data," MPRA Paper 3528, University Library of Munich, Germany, revised 2006.
    5. John Cotter & Kevin Dowd, 2010. "Estimating financial risk measures for futures positions: A nonparametric approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 30(7), pages 689-703, July.

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G0 - Financial Economics - - General

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