Minimum Capital Requirement Calculations for UK Futures

43 Pages Posted: 10 Jul 2007

See all articles by John Cotter

John Cotter

University College Dublin; University of California, Los Angeles (UCLA) - Anderson School of Management

Date Written: 2004

Abstract

Key to the imposition of appropriate minimum capital requirements on a daily basis requires accurate volatility estimation. Here, measures are presented based on discrete estimation of aggregated high frequency UK futures realisations 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.

Suggested Citation

Cotter, John, Minimum Capital Requirement Calculations for UK Futures (2004). Available at SSRN: https://ssrn.com/abstract=998495 or http://dx.doi.org/10.2139/ssrn.998495

John Cotter (Contact Author)

University College Dublin ( email )

School of Business, Carysfort Avenue
Blackrock, Co. Dublin
Ireland
353 1 716 8900 (Phone)
353 1 283 5482 (Fax)

HOME PAGE: http://www.ucd.ie/bankingfinance/staff/professorjohncotter/

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

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