Xiangjin Shen is a Senior Economist in the Financial Stability Department at the Bank of Canada. Her policy work focuses on financial stability and macro-economic stress testing issues. Her current research interests include econometrics, monetary transmission mechanism, bank funding transfer pricing, stability of clearing agencies and tail risk. Before joining the Bank, Xiangjin worked as a Senior Manager in the Global Risk Management department at the Bank of Nova Scotia. Xiangjin received her PhD in Economics from the Rutgers University.
In this paper, we explore the procyclicality of initial margin requirements based on VaR volatility models.We suggest procyclicality can be reduced using a three-regime model rather than using ad hoc tools.