The behavior of extreme values in Germany's stock index futures: An application to intradaily margin setting

摘要

Recent defaults and large financial losses attributed to derivative security investing point to an area of finance not often researched, i.e. the probabilities of observing extreme occurrences. This paper examines this behavior for German stock index, futures (FDAX) contracts. Its empirical results indicate that large FDAX intradaily price changes follow a Frechet extreme value distribution and the extreme value distribution probabilities may be confidently used to help set intradaily margin levels.