Tuesday December 10 2013
News Source: Global Exchanges
Focus: Derivative Market Segment
Type: General
Country: International
Link: http://www2.isda.org/attachment/NjE2NA==/SIMM%20for%20Non-cleared%2020131209.pdf
The International Swaps and Derivatives Association (ISDA) has released a Paper proposing a standard initial margin model for non-cleared derivatives in order to facilitate the introduction of final BCBS-IOSCO guidelines for “Margin requirements for non-centrally cleared derivatives”, published September 2, 2013 (the Guidelines). A common methodology would have several key benefits to the market, such as permitting timely and transparent dispute resolution and allowing consistent regulatory governance and oversight. In order to realise these benefits, agreement between market participants and global regulators on several key assumptions will be required. These assumptions, which are detailed in the document, are:
1. General structure of margin calculations
2. Requirement for margin to meet a 99% confidence level of cover over a 10-day standard margin period of risk
3. Model validation, supervisory coordination and governance
4. Use of portfolio risk sensitivities (“Greeks”) rather than full revaluations
5. Explicit inclusion of collateral haircut calculations within the portfolio SIMM calculation.
Click on the above link for more details.