Why gas and power derivatives margin can change unexpectedly

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There are a number of potential culprits responsible for unexpected changes in gas and power derivatives margin.

People often say that the calculation of Initial Margin is difficult to understand. However, it can be even more confusing if you find your margin requirement suddenly increasing when you haven’t made any changes to your portfolio.

The most obvious cause of unexpected changes in gas and power margin would be updates to CCP margin rates. These are most likely to occur when large price movements have been seen in the market, although they do also change periodically following a review by the CCP.

But if that isn’t the case, and there have been no parameter changes, why might you still be seeing large jumps in margin? There are a number of potential culprits, but they all have their roots in the way that CCPs set their margin rates.

 

Click here to read the full article by OpenGamma to find out

  • What is causing these jumps in margin and;
  • What you can do
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