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Margin BacktestingChristophe HurlinUniversity of Orleans; Université Paris IX Dauphine Christophe PerignonHEC Paris - Finance Department August 31, 2011 Abstract: This paper presents a validation framework for collateral requirements or margins on a derivatives exchange. It can be used by investors, risk managers, and regulators to check the accuracy of a margining system. The statistical tests presented in this study are based either on the number, frequency, magnitude, or timing of margin exceedances, which are de.ned as situations in which the trading loss of a market participant exceeds his or her margin. We also propose an original way to validate globally the margining system by aggregating individual backtesting statistics obtained for each market participant.
Number of Pages in PDF File: 19 Keywords: Collateral Requirements, Futures Markets, Tail Risk, Derivatives Clearing JEL Classification: G13 working papers seriesDate posted: February 9, 2012Suggested CitationContact Information
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