Variation margin
WHAT IS THIS? Variation margin is a payment – typically made daily, in cash – to reflect changes in the market value of a trade, or portfolio of trades. In over-the-counter derivatives markets, variation margin is traditionally seen as a buffer against counterparty default; in listed derivatives, it is treated as settlement.
The digitisation of legal negotiations and data
In partnership with Risk.net, specialists from AcadiaSoft, Linklaters, and the International Swaps and Derivatives Association weighed in on the digitisation of derivatives documentation for a virtual roundtable discussion. Recent innovations, aimed at…
Swaps data: CCPs – a systemically important market infrastructure
Disclosures show heavy concentration of initial margin in top three clearing services, writes Amir Khwaja
LCH SA on the hook for €32bn if member defaults
Payment obligation, if realised, would wipe out 50% of CCP’s liquidity buffer
CME issued $1.8 billion VM call in Q2
Margin call was the fourth largest made by CME’s futures and options unit since disclosures began
Recovery plans, CFTC equivalence and stress tests
The week on Risk.net, September 21–27, 2019
OCC reports 24% spike in default exposure
Clearing house’s peak same-day payment obligation rose to $5 billion in the second quarter
Big US banks hold more Treasuries as swaps collateral
Government securities made up 8.2% of all initial and variation margin at G-Sibs in Q2
EU banks seek last-minute margin reprieve for equity options
European dealers want exemption rolled over, to avoid handing US firms a regulatory advantage
OCC on the hook for $4bn if member defaults
Clearing house’s liquidity resources hit $7.9 billion in Q1
Quadruple witching triggers $1.5bn VM call at CME Clearing
Peak VM call was 56% bigger than the one in Q4 2018
Path-dependent American options
In this paper, the authors investigate a path-dependent American option problem and provide an efficient and implementable numerical scheme for the solution of its associated path-dependent variational inequality.
Eurex made €525m VM call in Q1
Margin call equivalent to 2% of CCP’s own liquidity resources
Emergency docs: funds rush to meet EU’s revised Emir rules
Isda asks for six-month extension as previously exempt funds hit with margin requirements
Swaps data: IM grows in listed and OTC markets
Data shows fourth-quarter jump in IM across all product groups and after-effects of Nasdaq losses
Court rules for Deutsche in negative interest case
Decision turns on Isda’s 2010 best practice guide, which said interest was only payable when rates were positive
In Netherlands vs Deutsche Bank, bets are on Deutsche
A decision is looming on Dutch appeal after being denied payment on interest rates gone negative
Podcast: Kaminski on lessons from commodity market defaults
Professor Vince Kaminski analyses Nasdaq and PJM defaults
Swap book values of US G-Sibs dropped in 2018
Settled-to-market technique responsible for some deductions year-on-year
Eurex member faced jumbo VM call in Q4 2018
Third-largest actual same-day payment obligation is the biggest since 2016
US version of SA-CCR could hurt settled-to-market swaps
Capital requirements on a client’s hedged options portfolio could increase by 1,100%
CFTC paves way for no-deal Brexit swaps transfers
Affiliate transfers would not trigger US margin rules if UK crashes out of EU without a deal
Choosing the right model for non-cleared OTC margining
When the final phase of the swaps market’s new margining regime takes effect in 2020, hundreds – possibly thousands – of buy-side firms will be hit by complex margin requirements.
Swaps data: cleared vs non-cleared margin
Growing margin burden for non-cleared swaps means cleared margin is likely to grow further, argues Amir Khwaja