Minimum capital requirement calculations for UK futures

✍ Scribed by John Cotter

• Book ID: 102218885
• Publisher: John Wiley and Sons
• Year: 2003
• Tongue: English
• Weight: 352 KB
• Volume: 24
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.10102

✦ Synopsis

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