Minimum Capital Requirement Calculations for UK Futures

Cotter, John (2004): Minimum Capital Requirement Calculations for UK Futures. Published in: Journal of Futures Markets , Vol. 24, (2004): pp. 193-220.

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.

• Item Type: MPRA Paper
• Institution: University College Dublin
• Language: English
• Subjects: G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G0 - General

References

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