Search results
1 – 10 of over 34000Hui Hong, Chien-Chiang Lee and Zhicun Bian
The purpose of this paper is to propose a new dynamic margin setting method for margin buying in China and evaluate the validity of its performance with the current margin system…
Abstract
Purpose
The purpose of this paper is to propose a new dynamic margin setting method for margin buying in China and evaluate the validity of its performance with the current margin system adopted by stock exchanges in extreme episodes.
Design/methodology/approach
This paper adopts the dynamic conceptual model of Huang et al. (2012) (which is based on Figlewski (1984)) but incorporates Markov chain to describe the data generation process of stock price changes. By applying the model to margin buying contracts for the period of March 16, 2018, to May 2, 2018 (baseline study) and June 15, 2015, to July 27, 2015 (robustness test), the model’s superiority to the current margin system adopted by stock exchanges is also tested.
Findings
The paper has several important findings. First, the margins derived by this system vary with market conditions, rising (declining) when stock prices go down (up), and are generally lower than the requirements imposed by stock exchanges. Second, this margin system induces lower overall percentage of costs than that adopted by stock exchanges. Third, parameter estimation plays an important role on shaping empirical results.
Research limitations/implications
The primary limitation of this paper lies in the fact that it does not solve the issue of determining optimal parameters of the Markov chain model. On the implication of findings, policy-makers and regulators on supervising margin buying activities may need a tune-up on the current margin system which features static margin requirements. Dynamic margins that incorporate market factors are virtually useful to balance the trade-off between liquidity and prudence.
Originality/value
To the best of the authors’ knowledge, this study is the first of its kind to develop a dynamic margin setting method for margin buying in China, aiming to balance the trade-off between liquidity and prudence. It not only takes into account the uniqueness of Chinese markets but also allows for time variations in both initial and maintenance margins.
Details
Keywords
Herbert L. Baer, Virginia G. France and James T. Moser
This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral…
Abstract
This paper develops a model that explains how the creation of a futures clearinghouse allows traders to reduce default and economize on margin. We contrast the collateral necessary between bilateral partners with that required when multilateral netting occurs. Optimal margin levels balance the deadweight costs of default against the opportunity costs of holding additional margin. Once created, it may be optimal for the clearinghouse to monitor the financial condition of its members. If undertaken, monitoring will reduce the amount of margin required but need not affect the probability of default. Once created, it becomes optimal for the clearinghouse membership to expel defaulting members. This reduces the probability of default. Our empirical tests suggest that the opportunity cost of margin plays an important role in clearinghouse behavior particularly their determination of margin amounts. The relationship between volatility and margins suggests that participants face an upward-sloping opportunity cost of margin. This appears to dominate the effects that monitoring and expulsion might have on margin setting.
Jian‐Hsin Chou and Hong‐Fwu Yu
The main purpose of this paper is to compute the appropriate margin level for the stock index futures traded on the Taiwan Futures Exchange (TAIFEX) and, then, to examine the…
Abstract
Purpose
The main purpose of this paper is to compute the appropriate margin level for the stock index futures traded on the Taiwan Futures Exchange (TAIFEX) and, then, to examine the appropriateness of the real margin requirement set by the TAIFEX.
Design/methodology/approach
This paper develops a new approach assuming the future's prices follow a geometric Brownian motion process. Compared with the extreme value theory that has been intensively used to determine the appropriate futures margin levels, one of the advantages of the present model is no need to specify the frequency at which extremes are taken.
Findings
The evidences indicate that the theoretical margins obtained by the proposed model can provide a more accurate and flexible margin level in accordance with the market volatility.
Research limitations/implications
The main limitation of this approach is that the natural logarithm of the futures prices is assumed to follow a Brownian motion process. However, such an assumption might not be practical for financial returns.
Practical implications
The research is helpful for the clearinghouse to set up its margins policy, especially under various conditions of volatility risks.
Originality/value
This paper proposes a theoretical procedure to set an appropriate futures margin for the TAIFEX. This paper also provides a better understanding of Taiwan's futures market that is newly launched and is useful for investors to hedge and speculate.
Details
Keywords
Difang Wan, Yang Yang, Dong Fang and Guang Yang
The purpose of this paper is to investigate whether the change of margin in Chinese futures markets has policy spillover effects.
Abstract
Purpose
The purpose of this paper is to investigate whether the change of margin in Chinese futures markets has policy spillover effects.
Design/methodology/approach
The paper constructs a model based on Harzmark and on Chng, taking Chinese futures markets status quo as a single species and restrictions on foreign investment into consideration, introduces the assumptions of spillover effect of speculators, then obtains investor's demand function. Subsequently, the effects of Shanghai Futures Exchange's 11 instances of margin changing are analyzed.
Findings
The paper finds that in the Chinese futures market, margin changing has impact on the open interest (OI) and the speculator spillover effect is validated.
Research limitations/implications
The irrational behavior of investors in markets is not taken into account in the model and data about spillover speculators were not directly available.
Originality/value
The paper usefully analyzes the effects of the Shanghai Futures Exchange's 11 instances of margin changing from 2000 to 2007 and examines the actual effects of margin‐changing policy, in the views of OI, trading volume and the externality, the results showing that margin changing has impact on investor structure and validates the existence of the assumed speculator spillover effect.
Details
Keywords
Permata Wulandari, Niken Iwani Surya Putri, Salina Kassim and Liyu Adikasari Sulung
The purpose of this paper is to measure the pattern of contract agreement process to map various banks’ position in perceiving Sharia conduct. This is done by incorporating the…
Abstract
Purpose
The purpose of this paper is to measure the pattern of contract agreement process to map various banks’ position in perceiving Sharia conduct. This is done by incorporating the dynamics of culture, market demand and Sharia literacy in different banks. Finding of this research will serve as the formula to map the latent degree of Islamic bank’s commitment to their strategic vision and identity as an Islamic-based financial institution.
Design/methodology/approach
This research develops its theoretical background in classical and contemporary literature review on murabahah contract in Islamic perspective. Focus group discussion (FGD) and in-depth interview are conducted on 32 bankers (in 14 Islamic banks), two National Sharia Council, five academicians and three central bank representatives as an input for qualitative analysis. Content analysis is utilized in this paper to emphasize the process of discovering the relationship between dynamic factors affecting contract agreement process in murabahah scheme in Indonesian banking.
Findings
There are four dimensions affecting the contract agreement: fairness to customer, country regulation, perceived business practicality and product characteristic. The four dimensions are assumed to be influenced with categories proposed, as the category item is mostly repeated and is perceived to be significant in the participant’s perspective.
Originality/value
This research will be beneficial in mapping the determinant of degree of Sharia compliance in Sharia banking in Indonesia, focusing on the contract agreement process.
Details
Keywords
Rohit Gupta, Indranil Biswas, B.K. Mohanty and Sushil Kumar
In the paper, the authors study the simultaneous influence of incentive compatibility and individual rationality (IR) on a multi-echelon supply chain (SC) under uncertainty. The…
Abstract
Purpose
In the paper, the authors study the simultaneous influence of incentive compatibility and individual rationality (IR) on a multi-echelon supply chain (SC) under uncertainty. The authors study the impact of contract sequence on coordination strategies of a serial three-echelon SC consisting of a supplier, a manufacturer and a retailer in an uncertain environment.
Design/methodology/approach
The authors develop a game-theoretic framework of a serial decentralized three-echelon SC. Under a decentralized setting, the supplier and the manufacturer can choose from two contract types namely, wholesale price (WP) and linear two-part tariff (LTT) and it leads to four different cases of contract sequence.
Findings
The study show that SC coordination is possible when both the supplier and the manufacturer choose LTT contract. This study not only identifies the influence of contract sequence on profit distribution among SC agents, but also establishes cut-off policies for all SC agents for each contract sequence. This study also examine the influence of chosen contract sequence on optimal profit distribution among SC agents.
Research limitations/implications
Three-echelon SC coordination under uncertain environment depends upon the contract sequence chosen by SC agents.
Practical implications
This study results will be helpful to managers of various SCs to take operational decisions under uncertain situations.
Originality/value
The main contribution of this study is that it explores the possibility of coordination by supply contracts for three-echelon SC in a fuzzy environment.
Details
Keywords
Chris Akroyd, Sharlene Sheetal Narayan Biswas and Sharon Chuang
This paper examines how the management control practices of organization members enable the alignment of product development projects with potentially conflicting corporate…
Abstract
Purpose
This paper examines how the management control practices of organization members enable the alignment of product development projects with potentially conflicting corporate strategies during the product development process.
Methodology/approach
Using an ethnomethodology informed research approach, we carry out a case study of an innovative New Zealand food company. Case study data included an internal company document, interviews with organization members, and an external market analysis document.
Findings
Our case study company had both sales growth and profit growth corporate strategies which have been argued to cause tensions. We found that four management control practices enabled the alignment of product development projects to these strategies. The first management control practice was having the NPD and marketing functions responsible for different corporate strategies. Other management control practices included the involvement of organization members from across multiple functions, the activities they carried out, and the measures used to evaluate project performance during the product development process.
Research limitations/implications
These findings add new insights to the management accounting literature by showing how a combination of management control practices can be used by organization members to align projects with potentially conflicting corporate strategies during the product development process.
Practical implications
While the alignment of product development projects to corporate strategy is not easy this study shows how it can be enabled through a number of management control practices.
Originality/value
We contribute to the management accounting research in this area by extending our understanding of the management control practices used during the product development process.
Details
Keywords
At the OCLC User Contact Desk, we keep a file of forms containing information on setting up printers to work with the M300 Workstation. We keep these forms in a notebook arranged…
Abstract
At the OCLC User Contact Desk, we keep a file of forms containing information on setting up printers to work with the M300 Workstation. We keep these forms in a notebook arranged by manufacturer name and model number and they can be difficult to locate if the manufacturer's name is not apparent and the manual for the printer is not available. Because we keep a copy of OCLC Micro handy to be able to answer callers' questions, we also have the software supplied with some issues. When we discovered the keyword searching and Boolean and and or capabilities of the 3by5 program, we decided to try using it for the information from the forms so that we could have additional access points (model name, type of printer, institution name, and/or network affiliation) to the information.
Michael M. Philipp and Ignacio A. Sandoval
The purpose of this paper is to describe the separate but related relief issued by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC…
Abstract
Purpose
The purpose of this paper is to describe the separate but related relief issued by the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) that permits the commingling and portfolio margining of centrally cleared credit default swap (CDS) positions held in customer accounts.
Design/methodology/approach
The paper provides a brief overview of the bifurcated approach taken to the regulation of CDS; explains the benefits of portfolio margining and the need for portfolio margining relief; and provides an overview of the relief provided by the SEC and CFTC.
Findings
The relief provided by the SEC and CFTC may contribute to the efficient use and allocation of capital by market participants; however, the SEC's and CFTC's orders are limited in scope only to CDS products, and the viability of the relief for CDS products will depend upon SEC approval of the margin methodology used by brokers to set margin levels for their customers.
Originality/value
The paper provides practical insights into first of its kind regulatory relief permitting commingling and portfolio margining of centrally cleared derivatives for customer accounts and the requirements incumbent on a market intermediary when implementing a program to commingle and portfolio margin centrally cleared CDS positions.
Details
Keywords
The purpose of this paper is to demonstrate that certain rules, implemented as a result of the Dodd-Frank Act (DFA) of 2010, should be harmonized between economically equivalent…
Abstract
Purpose
The purpose of this paper is to demonstrate that certain rules, implemented as a result of the Dodd-Frank Act (DFA) of 2010, should be harmonized between economically equivalent products in swap and futures markets to prevent regulatory arbitrage.
Design/methodology/approach
The paper focuses on rules surrounding margin requirements and block size thresholds. As such, a background of clearing and exchange systems is presented to familiarize the reader with the risk management objectives of the regulation. Viewpoints of several leading commentators taken from a Commodity Futures Trading Commission roundtable and comment letters are then analysed to support the argument that margin requirements and block size thresholds should be the same for similar financial products.
Findings
Based on the review and analysis of several commentators and industry participants, harmonization of rules for swaps and economically equivalent futures contract should be achieved to prevent regulatory arbitrage.
Originality/value
To the best of the author's knowledge, there are no articles that address the swap futurization debate in this detail. This paper will be of interest to readers who would like to learn more about how the DFA has impacted the derivatives market leading to the recent trend of swap “futurization”. It is also ideal for those who are unfamiliar with current clearing and exchange systems, as it presents background detail of this framework to supplement the debate on swap rules.
Details