Margin models
Better anti-procyclicality? From a critical assessment of anti-procyclicality tools to regulatory recommendations
The authors carry out quantitative and qualitative analysis of anti-procyclicality tools and suggest policy measures intended to make APC tools more effective.
US FCMs wrap up 2023 with required customer funds toeing record high
Wells Fargo, BNP Paribas marked new peaks in December
Clearing members cheer plan for more transparency on CCP margin
European Parliament wants to amend Emir 3.0 draft to put extra obligations on clearing houses
Bloating CCP default funds. New margin models. Are the two linked?
Dealers grumble that greater guaranty fund payments could undermine the ‘defaulter pays’ principle of clearing
NSCC had top margin breach of $1.2bn in Q3
Margin shortfall is largest on record for the CCP and bucks wider trend across global clearing houses
Hard concentration: clearing members want clarity from CCPs
FCMs complain they struggle to pass opaque margin calculations through to end-clients
Buy side still prefers bilateral repo despite LCH margin update
New model will cut margin faster after stresses abate, but costs still high for directional trades
CME’s Span 2 margin model generates systems headaches
Market participants welcome smarter margin requirements, but not the computational workload
Roll up for the BoE’s counterparty mystery tour
Letter warns of cross-currency repo risks, but they didn’t feature in Archegos or LDI blow-ups
ECC default fund changes set to cut clearing member contributions
Stress loss over margin designed to ease procyclical behaviour seen during 2022 energy shock
Why Isda ditched ‘off-cycle’ updates for Simm
Ad hoc updates riled industry, while regulators pushed for predictability in model recalibrations
Emulating the Standard Initial Margin Model: initial margin forecasting with a stochastic cross-currency basis
The authors propose a stochastic cross-currency basis model extension to resolve the impact of missing risk factors when estimating initial margin and margin valuation adjustments in cross-currency basis swaps.
LCH Ltd’s RepoClear margin model gets a makeover
Changes aim to make margin models for gilt repo more sensitive to market moves
Initial margin hits all-time high at two LCH services
Despite initial margin spike, breaches at SwapClear climb to nearly 19,000
Liquidity risk hits record high at CME
Heightened market volatility in Q1 pushes F&O’s worst-case payment obligation up 13%
Simm’s first off-cycle rejig hits non-cleared rates
Recalibration lifts initial margin for some products by 37% after year-end volatility forces update
What can we expect from a good margin model? Observations from whole-distribution tests of risk-based initial margin models
This paper offers a means of testing initial margin models based on their predictions of the whole future distribution of returns of the relevant portfolio which is demonstrated to be more powerful than typical backtesting approaches.
Nasdaq exec criticises VAR models in erratic energy markets
FIA Boca 2023: Model being adopted by rivals is “bad choice” for unpredictable assets, says exchange tech official
Soft inflation print triggers initial margin breaches at FICC
Clearing units for MBSs and government securities hit by backtesting deficiencies as coverage levels dip
Clearing house of the year: LCH
Risk Awards 2023: A member default and a spike in UK rates were handled with aplomb, while cleared volumes rose
LCH’s fixed income and IRS units hit by record margin breaches
Peak breaches in Q3 were £924 million and £698 million in size, respectively
Margin for non-cleared European energy trades to jump 80%
Annual recalibration of Simm could catapult some energy firms over relief thresholds
$899m margin breach at FICC’s mortgage unit
Three-day move in TBA prices on June 9 triggered second-highest backtesting deficiency to date
FICC’s government securities unit hit by $995m breach
Large moves in US Treasury yields in June to blame for largest backtesting exception on record