Margin Changes and Futures Trading Activity: A New Approach

46 Pages Posted: 17 Jan 2008

See all articles by Antonis A. Aristidou

Antonis A. Aristidou

City University London - Sir John Cass Business School

Kate Phylaktis

City University London - Sir John Cass Business School

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2008

Abstract

The paper examines the impact of margins, adjusted for underlying price risk proxied by market volatility, on trading volume and at the same time incorporates the relationship between trading volume and price volatility documented in equities and futures markets. The study estimates bivariate GARCH-M models to take account of the inter-relationships and applies them to the Greek derivatives market over the period 1999-2005. The results show that when adjusting margins for market risk there is no impact on trading volume, casting doubts on the results of previous research, and providing support for the view that margin requirements are used only as a mechanism to prevent trader default.

Keywords: Margin Requirements, Financial Market Volatility-Volume, Athens Stock Exchange

JEL Classification: G1, G14, G18

Suggested Citation

Aristidou, Antonis A. and Phylaktis, Kate, Margin Changes and Futures Trading Activity: A New Approach (January 1, 2008). Available at SSRN: https://ssrn.com/abstract=1084104 or http://dx.doi.org/10.2139/ssrn.1084104

Antonis A. Aristidou

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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