CCP initial margin models in Europe

Ismael Alexander Boudiaf, Martin Scheicher and Francesco Vacirca

No 314, Occasional Paper Series from European Central Bank

Abstract: In this paper we aim to provide a holistic understanding of the Initial Margin (IM) models used by Central Counterparties (CCPs) in Europe. In addition to discussing their relevance in terms of CCP risk management and their importance for the functioning of financial markets, we provide an overview of the main modelling frameworks used, including Standard Portfolio Analysis of Risk (SPAN) and Value at Risk (VaR) models.By leveraging on publicly available data, we provide an up-to-date picture of current modelling practices for specific cleared product classes, as well as various trends in IM modelling practices in Europe. We show how IM model frameworks vary materially, depending on the CCP’s past choices and the products it clears. Despite a propensity to switch to VaR models, idiosyncrasies and differences across CCPs are likely to persist.We conclude by highlighting current and upcoming challenges and risks to CCP IM model frameworks and linking the current status quo with ongoing and upcoming regulatory work at European and international level. JEL Classification: G15, G18, G19, G23, G28, G32

Keywords: Central Counterparties; initial margin models; model governance and validation.; risk management (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-ban, nep-eec and nep-rmg
Note: 152802
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpops/ecb.op314~afc6d2980c.en.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbops:2023314

Access Statistics for this paper

More papers in Occasional Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().