CoachAn initial-margin model sets the collateral a party must post against the loss its counterparty would suffer in closing out its portfolio after a default, over the margin period of risk, at a high confidence: at clearing houses at least 99% single-tailed, for bilateral trades 99% over ten days.
Examples
Example 25.2 (A member’s swap book)
A member’s cleared USD swaps have illustrative exposures of , , and thousand dollars per basis point at two, five, ten and thirty years (the P&L for a one-basis-point rise), a net thousand. With daily Treasury par yields standing in for swap rates, a five-day historical simulation at 99% over one year of history gives an initial margin of USD 4.19 million on average in February 2020.