A sound modelling and backtesting framework for forecasting initial margin requirements

Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM

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The introduction of mandatory margining for bilateral over-the-counter transactions is significantly affecting the derivatives market, particularly in light of the additional funding costs financial institutions could face. In the following, Fabrizio Anfuso, Daniel Aziz, Klearchos Loukopoulos and Paul Giltinan propose a consistent framework, equally applicable to cleared and non-cleared portfolios, to develop and backtest forecasting models for initial margin

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