A Comparative Empirical Study on the Margin Setting of Stock Index Futures Calendar Spread Trading

Using the data of Hang Seng index futures, this empirical research investigates EWMA method, ARMA-EGARCH model and EVT in order to provide a scientifically prudent and practically available approach for the margin setting of calendar spread trading in China. The results show that the three models above have their own advantages and disadvantages, taking the stability and practical feasibility into consideration. EWMA is simple in calculation and easy to be put into practice, but it may lead to an underestimation of the market risk due to the inaccurate decay factor in the model. EVT is prudent, but not easy to be widely implemented due to the requirement for chronic data accumulation. ARMA-EGARCH has the best performance in both accuracy of risk estimation and feasibility of practical implementation. To a certain extent, the research work provides both theoretical and empirical support for the margin setting of the coming CSI300 index futures.