Add a new comment:
LCH are worried I think about not getting the Fannie Mae and Freddie Mac business and using scare tactics.The chances of a clearing party going bankrupt when only clearing IRS is small especially as both buy and sell sides are putting up capital.And it's hard to see the FHFA backed Fannie and Freddie defaulting.
Interesting that both clearing companies LCH and IDCG are using the same Razor Risk software for risk management.Makes this issue a margin call and clearly LCH are worried about the new competition.
Posted by: Alan Davison
Alan: The chances of a clearing party going bankrupt when only clearing IRS is small
Bill: Unfortunate for Lehman - not something anyone planned, but contradicts your statement.
Alan: Razor used for IM
Bill: Whilst LCH have the Razor software, it takes no part in calculating the Initial Margin amounts for SwapClear. LCH use proprietary software to achieve this, using their own models.
Alan: LCH & IDCG both use Razor
Bill: The underlying IM models are different, IDCG is using SPAN, LCH uses PAIRS (a variety of VaR) with a full 5 year historic simulation.
What would be interesting is to know how standards for margin calculations are going to be arrived at, globally, and how they are effectively measured, monitored and enforced. Much like Basle 1 & 2 were global standards, they didn't deliver the capital requirements to save Lehman.
Posted by: Bill Hodgson
LCH.Clearnet CEO calls rival 'reckless' as Fannie, Freddie clearing battle heats up
Updating your subscription status
Access your premium magazine online
Sign up in 2 minutes
and immediate access to premium content.
Click on one of the following publications to get started:
Every week our editorial team deliver a range of email bulletins to ensure our readers know what is happening in their markets around the world.
This report covers the specific technologies required for firms to improve their ORM processes.
This white paper looks at the Basel Committee's BCBS239 principles, also known as PERDARR (Principles for Effective Risk Data Aggregation and Risk Reporting), which comes into force from 1 January 2016.
9th-12th June, London
Cyber Risk Europe
Quant Congress USA
London, 3 & 4 June 2015
London, 23 & 24 June 2015
London 25 & 26 June 2015
Risk iPad and iPhone Apps
Click here to see our full portfolio
Register for regular alerts to receive up to date news directly into your inbox
Has the industry got FVA wrong?
Three quants claim the standard approach to FVA is flawed and the resulting numbers are often much too high (see www.risk.net/2402050 and www.risk.net/2392762). Their views have some support, but what do you think?
© Incisive Risk Information (IP) Limited