A Var Study Of Required Margin For Securities Margin Trading

Functioning as a guide for the developing countries that are in a quandary period, this study examines the appropriateness of the 120% minimum required margin on securities margin trading in Taiwan. That is, whether the 120% cash position was good enough to cover the default risk for a financial holding company. In order to get a better risk management ability, Switching Regime Beta Model (SRBM) has been chosen. In analyzing the average VaR, there are three kinds of industries had been considered, that include electronics industry, finance industry and plastic industry. Different from the existing literatures, we transfer estimated VaR to a critical value in terms of the required margin; the results suggest that 120% cash position holding cannot cover the default risk for a financial holding company. The required margin should be raised.