Friday April 6 2018

News Source: Global Exchanges

Focus: Other

Type: General




On 4th April 2018 Eurex Clearing  outlined its commitment to ensure transparency when carrying out Central Clearing Counterparty (CCP) activities.

In order to ensure trading Transparency Eurex Clearing utilises an independent model validation which incorporates a number of validation instruments to regularly validate the conceptual soundness of the frameworks and adequacy of the risk models.

The three most important risk models operated by Eurex Clearing are the initial margin model, the collateral haircut model and the stress testing model:

  • The independent model validation uses a number of validation instruments to regularly validate the conceptual soundness of the frameworks and adequacy of these risk models. At the end of the year an annual comprehensive validation is performed along the model landscape. In the annual validation report, all validation results obtained throughout the year are summarized and provided to the internal management as well as the regulators. This yields an overall review of model performance and appropriateness. The report also assesses the effectiveness of processes and procedures relevant for managing model risks.
  • For the initial margin model, the model forecast corresponds to the initial margin of an individual portfolio and the observed outcome would be the respective realized clean profit and loss for that portfolio. Note that the term portfolio respect the segregation logic and corresponds to ‘the collection of positions in products of the same liquidation group within one account’, rather than the whole account or all positions under the same Clearing Member.
  • For the collateral haircut model, the model forecast corresponds to the collateral haircut of an individual security/ISIN and the observed outcome to the realised profit and loss for the respective security/ISIN. This is again opposed to a more aggregated view, which in that case would be collateral pool level.

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