Risk glossary

The standard initial margin model (Simm) is a common methodology to help market participants calculate initial margin on non-cleared derivatives under the framework developed by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions. 

The standardised margin methodology was developed by the International Swaps and Derivatives Association, and is intended to reduce the potential for disputes and create efficiency through netting of exposures. The model applies a sensitivity-based calculation across four product groups: interest rates and foreign exchange (ratesFX), credit, equity and commodities.

The Simm officially launched in September 2016 and an updated version, Isda Simm 2.0, became effective in December 2017 to include a range of clarifications, enhancements and additional risk factors.

An industry governance committee conducts an annual methodology review of the model and oversees any updates and recalibrations.

Independent consensus of risk weights for specific assets is determined by an Isda Simm crowdsourcing utility run by Ice Benchmark Administration. Participating banks vote on the appropriate risk buckets for positions on their books that are in scope for the non-cleared margin rules. The results are updated daily and used by market participants as inputs.

Click here for articles on Isda Simm.