Risk-based Margining At Eurex - Deutsche-boerse
Risk-BasedMargining
922.12.22.32.42.5General ConceptsNettingMargin Classes and Margin GroupsCurrent Liquidating ValueCurrent Liquidating MarginAdditional Margin2.5.1 Calculation of Worst-Case Scenario Exposures2.5.2 Additional Margin for a Margin Class2.5.3 Additional Margin for a Margin Group1010101033.13.23.3EquitiesEquitiesMargin ParameterExample1414141544.14.24.3BondsBondsMargin ParameterExample175Securities Financing Transactions18Contacts
AbstractThis document details the methodology of Risk-Based Margining (RBM), whichis Eurex Clearing’s risk methodology for bond and equity transactions, includingrepos and securities lending transactions as well as Exchange-Traded Funds (ETFs)and cash positions. The document contains several stylized examples showingthe calculation steps behind Current Liquidating Margin (CLM; backward-looking)and Additional Margin (AM; forwards-looking).TermMeaningTermMeaningAIAccrued interestRAIRDRisk adapted market interest rate – downAMAdditional marginS i,t ( ,0)CIRCash interest rateValue of security i on day t underthe base scenarioCLMCurrent liquidating marginSDSettlement dateCLVCurrent liquidating valueSPDaily settlement priceCLVCCurrent liquidating value cashSSPStandard settlement periodCLVSCurrent liquidating value securitySTKNumber of equitiesCNPCash net positiont’Standard settlement period fora standard spot transactionCPCash position sizeTEWMAExponentially-weighted moving averageNumber of calendar days betweenpayment- and valuation dateFHSFull historical simulation Time to maturity of instrument iDDownT minMinimum time to maturityDCPDays since last coupon paymentTDTrade dateDUSDDays until settlementTPTrade PriceDUTSDays until notional settlementUUpLPLast price on day TVaRValue-at-RiskLVLiquidating valueXSecurity positionMPMargin Parameter Offset factorMP minMinimum value of margin parameter LVChange in liquidating valueMVPosition market value riSecurity-specific basis point shiftto the yield curveNVNominal valueEquity market price rCCY, Interest rate risk component of yield shiftPPnLProfit and lossRInterest rateRAIRURisk adapted market interest rate – up CS , ,CCY Credit spread risk component of yield shift liq i,j, Liquidity risk component of yield shift Correlation coefficient3
1 IntroductionEurex Clearing AG acts as the central counterparty and guarantees the fulfillmentof all transactions in futures and options on Eurex as well as for other tradingsolutions such as EurexOTC Clear (interest rate swaps) and Eurex Repo (marketfor repurchase agreements and securities lending).This document details the methodology of Risk-Based Margining (RBM), whichis Eurex Clearing’s risk methodology for bond and equity transactions, includingrepos and securities lending transactions as well as Exchange-Traded Funds (ETFs)and cash positions.1In RBM, backward-looking margin is called Cash Liquidating Margin (CLM),whereas forward-looking margin is called Additional Margin (AM). Additionalmargin is always calculated as the product of the security price today, multipliedby a so-called Margin Parameter (MP), which captures potential price fluctuationat the 99th percentile. However, RBM uses different models for the margin parameter depending on asset class.Section 2 introduces the concepts of margin class and margin group, whichare ways of grouping positions with similar underlyings and allow (partial) nettingof opposite risks. The price as of the valuation date of a security or cash positionis called the Current Liquidating Value (CLV). This value demonstrates the generalprinciples behind netting for CLM and AM.Section 3 presents the margin parameter methodology for equity transactionsand the section concludes with a detailed example.Section 4 describes the bond methodology, including a detailed example.Finally, section 5 briefly describes Securities Financing Transactions (SFTs).1Eurex Clearing’s risk methodology Prisma is used for exchange-traded derivatives such as futures and optionsas well as for OTC interest rate and inflation derivatives. For more details cf. Eurex Clearing Prisma.4
2 General Concepts2.1 NettingPositions are divided into cash and security legs,which can both be processed either on gross or netbasis since transaction management for CCP eligiblesecurities supports gross settlement handling.The security position represents the quantityof securities to be delivered or received, whereasthe cash position describes the payable amountdefined at execution time. Furthermore, corporateactions such as creation of subscription rightsor payments of dividends can result in cash and /orsecurity positions relevant for the margining process.ISIN, and contractual settlement date. The resultis one security and one cash net position, either longor short.Position aggregation and handling of net and grosspositions are illustrated in Figure 1. The portfoliocontains six positions 2, with long positions identifiedby positive numbers and short positions by negativenumbers. The initial portfolio is shown in the boxon the left, with gross positions in blue (G1– G3) andnet positions in green (N1 – N3).Positions marked for gross processing are not subjectto settlement netting and must be consideredindependently, i.e., long and short positions do notcompensate each other. From the CCP’s pointof view, they form either a security gross longor security gross short position.The box in the middle of Figure 1 shows the firstlevel of aggregation. All net positions are added,resulting in a single long or short position, in thiscase, a net long position. For gross positions, all longpositions are added to a single long position, andsimilarly for all gross short positions. The resultis a single gross short position and a single grosslong position.Net positions, on the other hand, can compensateeach other so that totals of security positions andtotals of payable amounts are aggregated. Net positions are constructed separately for the cash andsecurity legs by grouping by currency, margin class,The graph on the right shows the final step of the aggregation. The net position is added to the grosslong position, resulting in a final single long position.This position and the remaining gross short positionare input to calculate margin figures.Figure 1: Gross and net aggregationG shortG1abs (G short)G2G longG3N &G longN1N te that this example illustrates the general concept of gross and net positions, as the actual calculation does involvethe trade prices summing up to the CLVs on the cash and security sides. The concept of CLV is defined in section 2.3and detailed examples are found in section 3.3 for equities and section 4.3 for bonds.5
2.2 Margin Classes and Margin Groups2.3 Current Liquidating ValueA trade will depend on an underlying, either an equityor a bond. Based on the underlying, the RBM methodology groups positions in margin classes. For instance,if a company has issued several types of equity, positions on these equities can end up in the same marginclass. Positions classified within the same marginclass are subject to offsets/netting, allowing equal butopposite risks to cancel. Notice that currency is definedon margin class level.The Current Liquidating Value (CLV) is the valueof a cash or security position discounted from settlement date to the current valuation date.For example, a simple spot market transaction, a longsecurity position (positive MV), results in a corresponding short cash position (negative CP). Followingthe above definition, the resulting CLVSecurity is negative and CLVCash is positive. As the security needsto be delivered to the holder of the long position afterthe settlement period, the value of CLVSecurity reflectsthe claim of the holder of the long position as it reducesthe margin requirement due to the negative sign.On the other hand, the positive value of CLVCashreflects the future obligation of the holder of the longposition, which needs to be covered with a margin,resulting in a margin debit.Margin classes can be, but are not necessarily, furtherconsolidated into margin groups. A margin groupis a set of margin classes whose associated underlyinginstruments have proven to be significantly correlatedand where the correlation is meaningful from an economic point of view. For example, state bonds belongto the same margin group. In some cases, partialnetting is allowed for product IDs related to the samemargin group. First, pairwise correlations ρ30 and ρ250between products assigned to margin classes withinthe same margin group are calculated based on datafrom the previous 30 and 250 business days, respectively. An offsetting effect between products of twomargin classes within the same margin group is onlygranted if min(ρ30, ρ250) 0.5.In order to protect the CCP against shifts in marketrates, the formula for CLVCash is based on conservativeassumptions. The rate used to discount positive cashpositions (RAIRD) is below market rates, therebyoverstating the value of the expected cash receiptto the CCP. The rate used to discount negative cashpositions (RAIRU) is above market rates, therebyunderstating the cost of the cash flow to the CCP.3The market rate shift leading to RAIRU and RAIRDis currently set by Eurex Clearing to 100bp but maybe revised at the discretion of the CCP.The details of netting at margin class and margin grouplevel for the forward-looking margin are describedin detail in sections 2.4 –2.5.Table 1: CLV calculation for cash and security positionsClient security ecurityCashCLVCash CLVCash – CP1 RAIRD t365– CP1 RAIRU t365CLVSecurity – MV1 r t’365size of the cash position (CP is negative if the client is short on the cash leg and is positive if the client is long)Risk adapted market interest rate up and down to provide protection of the CCP against changes in interest ratesnumber of calendar days between payment- and valuation datemarket value of the position equal to the payable amount. For equities MV X P while MV X (P AI) for bondssecurity position (negative for client short and positive for client long)market price of the equityamount of accrued interestinterest rate relevant for the time period from the valuation date to the payment datestandard settlement period for a standard spot transactionAs the expression for CLVSecurity does not distinguish between discount rates for long and short positions, same-size long and shortsecurity positions will offset each other. However, due to the differences in discounting for long and short cash positions, the valuesof CLVCash do not sum to zero for otherwise identical long and short positions.6
2.4 Current Liquidating MarginThe backward-looking margin for security and cashpositions is called Current Liquidating Margin (CLM).CLM covers losses that would occur if positions wereclosed out today. The basis for the CLM calculationis the current liquidating value, which is calculatedindividually for cash and security legs of positionsas outlined in the previous subsection.The difference between the current market price andthe trade price determines whether a member receivesa CLM margin credit or debit from a position. A longposition leads to margin credit if the current marketprice is higher than the price at which the trade wasmade and a margin debit in case the current marketprice is lower than the trade price. The situationis reversed for short positions.In order to calculate CLM, the CLVs of a security andcash position are added, resulting in CLM for a position.The lowest calculation level is per settlement datewithin a margin class. The current liquidating marginfor an aggregated net position in a margin class equalsCLM NET CLVcash, net CLVSecurity, netNote that the CLMNET can also result in a negativevalue resulting in margin credit for the respectiveaccount.As already stated, for every gross position the CLMis calculated separately, as no netting is permissible.The gross position is only considered if it resultsin a margin requirement. Therefore, CLM for a grossposition in the margin class is calculated as CLM GROSS max CLVCash, gross CLVSecurity,gross , 0CLM of a margin class k equals the sum of the CLMsof all gross positions and aggregated net positionsin the respective margin class, i.e.:CLMk CLM CLMkNETkGROSS2.5 Additional MarginAdditional Margin (AM) is the forward-looking margincovering losses on a predefined confidence level.It is the difference between the worst-case liquidatingvalue resulting from the projection for the given confidence level and the current price. A central conceptis the Margin Parameter (MP), which, when appliedto the current market price, gives a conservativeestimate of the price at confidence levels 1% and99% (covering short and long positions, respectively).The parameter is calibrated at product level fromthe distribution of profit-and-loss (PnL) scenarios basedon historical market data movements with respectto the assumed holding period. The calculationof the margin parameter is described for equitiesin section 3 and bonds in section 4.4Relevant margin measures and their methodologies(described in detail in coming sections) are summarisedin Table 2 below.Table 2: Margin ModelsAMCLMVolatilitybasedBond ModelGC PoolingManualOverrideEquityETFBonds, Special Repos, Sec lendingGC Pooling ReposCash positions4ETF margin parameters are either given by expert judgment or from a volatility-based model as for equities and will thereforenot be discussed further.7
2. 5.1 Calculation of Worst-Case Scenario ExposuresThough additional margin is well-defined on securitylevel, the lowest calculation level is margin class level,i.e., a portfolio of several instruments based onthe same underlying is margined together. However,for the spot market, most margin classes consist ofa single security for which a calculation on margin classlevel will not differ from a security level calculation.This process provides capital efficiency, offsettingsimilar but opposing positions leading to considerablyless margin requirement on account level thanif the sum of all margin requirements for eachindividual position had to be provided separately.To obtain AM on margin class level, the first stepis to calculate the worst-case scenario exposures.Several input variables need to be defined for thiscalculation. First, the concept of risk array is introduced. A risk array consists of all projected scenarioexposures and the current price. Figure 2 illustratesthe simple case for a single security margin class.Figure 2: Risk array for a margin class consistingof a single securityScenario price (UB) MPCurrent priceMP2.5.2 Additional Margin for a Margin ClassFor margin classes containing a single security, the riskarray is simple, consisting of the boundaries andthe settlement price as discussed in the previoussubsection. For spot market products, AM is onlycalculated for security positions, as the cash sidealready reflects a forward-looking component withinthe CLM calculation. Recall from section 2.1 the calculation of net and gross positions. The potential resultwas either one position on the long or short sideor two positions on both sides in case of existing grosspositions in different directions.For a positions rp and scenario i associated witha margin class k, the following liquidating values LV ki , rp are calculated 5:Table 3: LV (liquidating value) for securitiesRisk Position-Short i: Upk, rp – short XLV UB– CLV k, rp – short X short , Pshorti: Downk, rp – short XLV LB– CLV k, rp – short Xshort , PshortWhere:Xequals the quantity of securities (negative for a membershort position).PUBLBis the settlement price.upper boundlower bound Scenario price (LB)An identical calculation is performed for a long positionwhere X long 0.If the margin class contains one security, the risk arrayconstruction is straightforward. Take as an examplea bond margin class consisting of a single security.The risk array will consist of the three elements upperbound and lower bound security prices calculatedusing the margin parameter and the bond’s currentprice. Additional margin is determined from the lossside of the two projected bounds dependingon the position size within the respective portfolio.5The following LVs are used per security position rpin the margin class k: k,rp max– shortk,rp – long LV UB LV k,rp, LV UBUBk,rp max– short– long LV LB LV k,rp, LV k,rpLBLBFigure 3 illustrates the above-outlined calculation forlong and short security positions. The largest differencebetween the scenario liquidation values for long andshort positions compared to CLV determines the tworespective scenarios.Omitting for clarity that CLV for bonds also depends on accrued interest.8
Figure 3: Calculating LV for a security margin classLongShortScenario price (UB)k, rp – long LVUBk, rp – short LVUBCurrent priceCLV k, rp – longCLV k, rp – shortk, rp – long LVLBk, rp – short LVLB SecurityScenario price (LB)If margin class k contains multiple securities,the LV ki ,rp are aggregated for the two scenariosup and down. The larger of the two scenario valuesis defined as the margin class's additional marginif the margin class is not assigned to a margin group.maxk,rp LVUBmaxk,rp LVLBTable 4 demonstrates aggregation in case of a margingroup consisting of three margin classes.Table 4: Aggregated margin group LV2.5.3 Additional Margin for a Margin GroupRBM allows partial forward-looking risk nettingof positions in different margin classes if thesemargin classes belong to the same margin group.LevelUpDownMC1 LVu1, ad j LVd1, ad jMC2 LVu2, ad j LVd2, ad jAdditional margin on margin group level is determined by an overall worst-case scenario. Dependingon the net position in a margin class, the underlyingupshift scenarios might result in AM debit or credit.Remember that for each margin class k, worst-caseprice-up and price-down scenarios were calculated:MC3 LVu3, ad j LVd3, ad j LVuk Prices Up: Prices Down: LVdkAll scenario profits which result in margin crediton margin class level are adjusted with an offsetfactor γ, between 0 and 1. Offset factors greater thanzero are allowed in case of significant and reliablecorrelations between the securities driving the marginclasses. Offset-adjusted scenario values are definedfor margin class k as LVik,ad j LVikγ LVikif LVik –0if LVik 0, i u, dMG LVk, ad juk LVk, ad jdkGiven the aggregated scenario values of the margingroup, additional margin for the margin groupis defined asAMMG maxp u,d k LVpk, ad jRisk figures for individual margin classes are evaluatedin a single currency. Therefore, currency differencesmust be taken into account during aggregation frommargin class to margin group level. Margin classscenario PnLs are converted to reporting currencyusing adjusted exchange rates, i.e., FX rates to whicha haircut has been applied. Given the convertedscenario values, the relevant worst-case scenariois determined as described above. The result of thisprocess is margin group impact-adjusted additionalmargin on margin class level per currency.9
3 Equities3.1 Equities3.2 Margin ParameterA transaction in spot equities is an exchange of securities for cash. An investor with a long equity positionacquires a specific number of shares of a certainsecurity at a specific point in time (standard settlement period) for a specific amount (delivery versuspayment). At settlement, the short position receivesthe agreed-upon price and is required to deliverthe security.A volatility-based model is used for the margin parameter for equities. Risk factor EWMA (ExponentiallyWeighted Moving Average) volatilities from 30 daysand 250 days lookback periods, respectively, are calculated daily. The maximum of these volatilities is scaledto the 99th percentile. The result is floored by a minimum value to limit procyclicality. This minimum valueis calculated as the 99th percentile of a time seriesof absolute log returns with a lookback period of 10Y.Finally, a multiplicative liquidity add-on is appliedto the margin parameter to account for illiquidity.The lowest level of aggregation for equities is theposition per ISIN.3.3 ExampleThis example serves as a demonstration for the determination of positions. For this reason, only trades ofone trading participant in one security are considered.Table 5: Sample parameters for example of equity risk calculationParameter nameAbbreviationValueEquity ISIN-DE0005810055 Deutsche Börse AGMargin parameterMP10%Cash interest rateCIR5%Risk adapted interest rate – upRAIRU6%Risk adapted interest rate – downRAIRD4%Standard settlement periodSSP2Days until settlementDUSD2Daily settlement priceSPEUR 39.10Table 6: Sample equity portfolioTrade IDTradebuy/sellProcessingmethodNumberof sharesTrading price(EUR)Payable amount(EUR)1BuyNet 20042.10–8,420.002BuyNet 10043.20–4,320.003SellNet– 5040.65 2,032.504BuyGross 10038.80–3,880.005SellGross– 5038.00 1,900.006SellGross– 10041.00 4,100.0010
All trades not marked for gross processing are accumulated and result in an (aggregated)net position, either long or short. Trades that are marked for gross processing individuallyrepresent a position. Positions are split into a security side and a cash side. Additionally,in this example, a positive (negative) sign next to the number of shares means thatthe respective member receives (delivers) equities. A positive (negative) sign in front ofthe payable amount means that the respective member receives (pays) cash payments.In this example, the aggregation of net positions amounts to:Table 7: Aggregation of equity portfolio – net positionsTrade IDNumberof sharesTrading price(EUR)1 20042.10–8,420.002 10043.20–4,320.00– 5040.653 250Security long and cash short aggregated net positionPayable amount(EUR) 2,032.50–10,707.50Positions marked for gross processing amount to:Table 8: Aggregation of equity portfolio – gross positionsTrade IDNumberof sharesTrading price(EUR)Payable amount(EUR)4 10038.80–3,880.00Security long and cash short gross position 1 1005– 50Security short and cash long gross position 2– 506–100Security short and cash long gross position 3–100–3,880.0038.00 1,900.00 1,900.0041.00 4,100.00 4,100.00Now, CLVs are calculated for the aggregated net and gross positions. Denotingby STK the number of equities and by CNP the cash net position, CLV is determinedby the expressionsCLVequity (short)CLVcash (long)CLVcash STK SPSSP1 CIR 365 CNP 1 RAIRD DUS365 CNP 1 RAIRU DUS365 11
Table 9: Current Liquidating Values (CLV) and Current Liquidating Margin (CLM) for sample equity portfolioSecurity Short / Cash Long (EUR)Security Long/Cash Short (EUR)Current Liquidating MarginNet position (trade 5)Net position (trades 1 –3)CLV security:–250 39.10 / (1 (5% 2/365))– 9,772.32CLV security:– (– 50) 39.10 / (1 (5% 2/365)CLV cash:– (–10,707.50) / (1 (4% 2/365))10,705.15CLV cash:–1,900.00 / (1 (6% 2/365))CLM932.831,954.46–1,899.38CLM55.09Gross position 3 (trade 6)Gross position 1 (trade 4)CLV security:–100 39.10 / (1 (5% 2/365))–3,908.93CLV cash:– (–3,880.00) / (1 (4% 2/365))3,879.15CLM–29.78Current Liquidating Margin (EUR)CLV security:– (–100) 39.10 / (1 (5% 2/365))3,908.93CLV cash:– 4,100.00 / (1 (6% 2/365)– 4,098.65CLM–189.72Adjusted MarginUnadjusted MarginFor the net risk position (trades 1–3)932.83For the gross risk position 1 (trade 4)–29.780.00For the gross risk position 2 (trade 5)55.0955.09For the gross risk position 3 (trade 6)–189.720.00932.83Current Liquidating Margin (EUR)987.92Total CLM is the sum of all positive margin values (margin debit). Negative margin values(margin credit) are floored at zero. In this example, the margin credits of the grosspositions 1 and 3, resulting from trade 4 and 6, do not offset any margin debits withinthe CLM.The first step in calculating additional margin is to determine the sum of the long andshort security positions (gross positions and the aggregated net position). Aggregatedlong net position and the corresponding security long (or short) gross positionsare grouped as follows:Table 10: Grouping gross and net positionsNumber of EquitiesNumber of EquitiesSecurity long and cash shortaggregated net position 250Security short and cash longgross position 2Security long and cash shortgross position 1 100Security short and cash long grossposition 3–100Total security long position andcash short position 350Total security short position andcash long position–150–50The LV is now calculated for the resulting positions. Consider the price shifted up anddown, respectively, by the margin parameter:PU SP (1 MP)PD SP (1 – MP)The current liquidating value isCLV – STK SPSSP1 CIR 365 12
Similarly, liquidating values in the up and down scenarios areLVU LVD – STK PUSSP 1 CIR 365 – STK PDSSP 1 CIR 365 From this, LVU LVU – CLV LVD LVD – CLVTable 11: Additional margin for sample equity portfolioSecurity short position and cash long positionSecurity long position and cash short positionAdditional MarginMaximum Price – UpPU 39.10 (1 0.1)43.01Maximum Price – UpPU 39.10 (1 0.1)43.01Maximum Price – DownPD 39.10 (1 – 0.1)35.19Maximum Price – DownPD 39.10 (1 – 0.1)35.19Liquidating Value – Up–350 43.01 / (1 (5% 2/365))–15,049.38Liquidating Value – Up– (–150) 43.01 / (1 (5% 2/365))6,449.73Liquidating Value – Down–350 35.19 / (1 (5% 2/365))–12,313.13Liquidating Value – Down– (–150) 35.19 / (1 (5% 2/365))5,277.05CLV–350 39.10 / (1 (5% 2/365))–13,681.25CLV– (–150) 39.10 / (1 (5% 2/365))5,863.39 LVU LVU – CLV LVD LVD – CLV586.34–586.34 LVU LVU – CLV LVD LVD – CLV–1,368.131,368.13Additional margin is set to the maximum of the LVU and LVD; in this example,AM EUR 1,368.13. Finally, the total margin requirement is determined as the sumof additional margin and current liquidating margin.Table 12: Total margin for sample equity portfolioTotal MarginCurrent Liquidating Margin987.92Additional Margin1,368.13Total Margin2,356.0513
4 Bonds4.1 BondsA transaction in bonds is the exchange of fixed incomesecurities for cash. The buyer acquires the par value ofa specific bond at a specific point in time for a specificamount. At settlement, the seller receives the salesprice from the buyer and is required to deliver thebond. In addition to the sales price, the buyer mustpay the accrued interest on the bonds from the lastcoupon payment up to the settlement date.Similar to equities, bond trades are separated intocash and security positions for margining purposes.For example, a bond trade to deliver EUR 100,000nominal bonds to the CCP against a payment ofEUR 99,950 from the clearinghouse on a certain datewould be treated as two separate positions as follows: Short position: Bond position with nominalEUR 100,000 Long position: Cash position of EUR 99,500Transaction management for gross positionsis described in section 2.1.4.2 Margin ParameterSingle security margin parameters are definedat security level as MP : max MP ,min , CCY ,i, t Si,t (max (T, Tmin ), ri ( ))S i, t (T, 0) –1Bond shifts are security-specific and depend on instrument characteristics (currency, tenor, credit cluster,rating, liquidity cluster). Shifts are obtained by combining three key components, ri : rCCY, cs , , CCY liq i, j, with rCCY, 0 cs , , CCY 0 liq i, j, 0Interest rate yield shift for currency CCY andtenor τCredit spread yield shift for credit cluster γ(rating ρ for Credit Sector Model) andcurrency CCYLiquidity Adjustment-driven yield shiftof security i within liquidity cluster j and rating ρYield shifts are applied to current yield curve levels anda re-valuation of securities is performed to computethe actual margin parameter.The yield shift's interest rate and credit componentsare determined by applying a multi-component modelto the bond risk factors. The model is a Full HistoricalSimulation (FHS) Value-at-Risk (VaR) model with a 3Ylookback period with VaR taken at the 99th percentile.Furthermore, the model is subject to an anti-procyclicality measure (10Y unfiltered VaR acting as a floorto limit procyclicality) as well as model add-ons.The liquidity component is based on product andmarket characteristics.Finally, ECB bond haircuts are used forGC pooling repos.whereValue of security i on day t under the base scenarioS i,t (T,0) riSecurity-specific basis point shift to the yield curveminMP , , CCY Minimum value of margin parameterTTime to maturity of instrument iMinimum time to maturityTminSince bonds that are very close to maturity will exhibitunreasonably small margin parameters, the minimumtime to maturity has been introduced to ensure a stablemargin parameter floor.14
4.3 ExampleThis is an example where a bond is sold and margin is calculated from a buyer’sand seller’s point of view. Table 13 below contains bond and margin parameters,whereas Table 14 shows the relationships between the dates that are relevantfor the margin calculation.Table 13: Sample parameters for example of bond risk calculationParameter nameAbbreviationValueBond ISIN-DE0001141349CouponC4.250%Margin class-DE40Margin parameterMP0.750%Trade dateTD09/26/2001Day of assessmentT09/28/2001Settlement dateSD10/01/2001Notional settlement date (T SSP)T SSP10/03/2001Nominal valueNV5,000,000Trade priceTP101.355Last price on day TLP101.540Accrued interestAI2.643%Cash interest rateCIR3.120%Risk adapted interest rate – upRAIRU4.120%Risk adapted interest rate – downRAIRD2.120%Standard settlement periodSSP3Days until settlementDUSD3Days until notional settlementDUTS5Days since last coupon paymentDCP225Table 14: Bond dates relationships SSPTD09/26 SSPT09/27Weekend09/2809/29SD09/3010/01T SSP10/0210/03DUSD 3DUTS 5The Cash Net Position, CNP, is the amount due from the buyer at date SD:CN
the same margin group are calculated based on data from the previous 30 and 250 business days, respec-tively. An offsetting effect between products of two margin classes within the same margin group is only granted if min(ρ30, ρ250) 0.5. The details of netting at margin class and margin group level for the forward-looking margin are described
or W-9), Eurex Clearing has classified its Clearing Members as either Section 871 (m) IRC eligible or Section 871 (m) IRC non-eligible. Besides, Clearing Members have to provide Eurex Clearing with all information required for the purposes of Form 1042/1042-S reportin
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