OCC quants tout anti-procyclical margin method
Technique aims to lower initial margin calls in times of stress without sacrificing risk sensitivity
Two quants at one of the world’s largest clearing houses believe they have come up with a remedy for one of the thorniest challenges facing their industry: how to stop initial margin models, designed to protect against future risk exposure, from ramping up too dramatically when volatility suddenly spikes?
In a paper published in the Journal of Risk, Lauren Wong and Yang Zhang, two quants from the Options Clearing Corporation (OCC), propose a dynamic approach to risk-based margining which they
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