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Quantitative Finance · Glossaire

Qu'est-ce que « Variation margin and initial margin » ?

Aussi appelé : variation margin · initial margin

Definition 5.7 Markets I: The Ecosystem and Exchange-Traded Markets · Chapitre 5 — Clearing and Settlement

Variation margin is the daily (or intraday) payment of the change in value of a member’s open positions: losers pay, the CCP passes the cash to winners, and exposures restart from zero. Initial margin is collateral deposited against the loss the CCP could suffer on the member’s positions between its last variation-margin payment and the moment the CCP has finished closing them out, a delay called the margin period of risk.

The value-at-risk margin of at 99% confidence. Margin is linear in volatility: a stock that becomes five times more volatile overnight costs five times more to clear the next morning. Data: computed by the chapter’s script.
Figure 5.3. The value-at-risk margin of Method 5.8 at 99% confidence. Margin is linear in volatility: a stock that becomes five times more volatile overnight costs five times more to clear the next morning. Data: computed by the chapter’s script.

Exemples

Example 5.12 (September 2008)

When Lehman Brothers defaulted on Monday 15 September 2008, the London clearing house for interest-rate swaps held its portfolio: 66 390 trades with a notional value of $9 trillion in five currencies, against about $2 billion of initial margin. Traders seconded from member banks hedged the portfolio alongside the clearing house’s risk team; between 24 September and 3 October the hedged currency portfolios were auctioned. The clearing house reported that the default was managed well within the margin held and that its default fund was not used. The episode became the standard argument for the clearing mandates that followed.

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