Probability forecasting of margin calls and its application in margin account with a single asset

Jiafeng Chen, Weipeng Sun and Minshi Liu

Communications in Statistics - Theory and Methods, 2025, vol. 54, issue 23, 7383-7402

Abstract: In this article, we present a method for forecasting the margin call probability of a futures margin account based on the reflection principle. Given the confidence level of the margin call probability, we establish the relationship between the initial leverage ratio g0, the upper limit of the leverage ratio G, and the holding period T. This relationship is determined by the quantile of the distribution of the futures price. Finally, within the given holding period, two key issues are addressed using the above results: calculating the account risk value and estimating the safe initial leverage ratio. Empirical analysis of the Chinese futures market shows that the method is effective to solve the above issues.

Date: 2025
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DOI: 10.1080/03610926.2025.2474629

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