Portfolio Compression in the Derivatives Markets

Diana Higgins

"Double, double toil and trouble; Fire burn, and cauldron bubble."
William Shakespeare

Portfolio compression has been viewed as an uncommon technique used by some companies that discovered the benefits of eliminating transactions in a portfolio to reduce various risks. Others learned about compressions to close out portfolios with companies in default in the early 2000s. It was only in 2012 and 2013 that compressions emerged into the light as part of the Dodd-Frank act and EMIR regulation. Not surprisingly, by 2015 there was still very little in the way of sources of information or statistics about the subject. Although this book is the first compilation of the information available in the market, and the first to explain how to compress in practice, the author ’s experience comes from energy commodities in Europe, and therefore most of the topics in this book are based on her knowledge about compressions in the energy space from the European perspective.

The information in this chapter is based on public sources, with most being published by TriOptima, the company that pioneered multilateral compressions in 2003 – information from TriOptima’s website, that posted by other