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September 20, 2011

CME IRS Margin Methodology

IFR have a story that CME have moved away from Principal Component Analysis to a Historic VaR model. It’s interesting that the reason this took place was to enable CME to calculate IM across a multi-currency portfolio, rather than a single currency (USD). This puts CME in the same space as SwapClear in using historic VaR. SwapClear has more than 10 years experience at operating a the HVaR model, I wonder how quickly CME can reach the same level of expertise. Feedback in the market is that the large dealers are using CME to clear client trades, where the client requests CME as their CCP, but the inter-dealer trades remain at SwapClear.

http://www.ifre.com/cme-overhauls-margining-methodology/1606914.article


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