Download this Paper Open PDF in Browser

Margin Backtesting

19 Pages Posted: 9 Feb 2012  

Christophe Hurlin

University of Orleans

Christophe Perignon

HEC Paris

Date Written: 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.

Keywords: Collateral Requirements, Futures Markets, Tail Risk, Derivatives Clearing

JEL Classification: G13

Suggested Citation

Hurlin, Christophe and Perignon, Christophe, Margin Backtesting (August 31, 2011). Available at SSRN: https://ssrn.com/abstract=2001988 or http://dx.doi.org/10.2139/ssrn.2001988

Christophe Hurlin

University of Orleans ( email )

Université d'Orléans
Rue de Blois B.P. 6739 45
France

Christophe Perignon (Contact Author)

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Paper statistics

Downloads
425
Rank
57,310
Abstract Views
1,436