April 25, 2016

Master Your Initial Margin Before Someone Else Does It For You

Undertanding the drivers for your Initial Margin, both up and down, is a skill firms should master. Your competitors will use that knowledge to lower costs and make profits by reducing and switching exposure within and across CCPs.

Clearing for OTC rate swaps began in 1999, now 17 years ago, but most individuals in most firms can't even begin to explain a simple historic value-at-risk calculation. Some believe this is the domain of 'quants' and people with over-sized brains, in reality building a distribution of profit loss in Excel, and finding an IM figure should be at the fingertips of everybody near to margin, collateral or clearing.

I bet many of you don't even know why this matters, don't know that you can reduce your IM for your cleared and un-cleared business, and even switch exposure across CCPs to have a dramatic effect on IM costs.  We put together a series of videos to explain why this matters, and what you can do with this knowledge, including questions like:

  • Whether you should blindly trust the IM calculation from anyone, CCP or otherwise
  • Why you need to know your IM before you execute a trade
  • What your competitors are doing to optimise their Initial Margin
  • Why your traders and CVA desks ought to be responsible for actively managing your IM
  • Why you won't know whether you are getting a 'transparent' price for your trades, withour knowing your impact on IM

All this information is free and in bite-sized chunks, just click over to here and watch the pieces which are valuable to you. When these raise questions you can't find an answer to, post a comment below or send an email to us and we'll get you the answers.


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