Efficient ISDA Initial Margin Calculations Using Least Squares Monte-Carlo

Asif Lakhany and Amber Zhang

Papers from arXiv.org

Abstract: Non-cleared bilateral OTC derivatives between two financial firms or systemically important non-financial entities are subject to regulations that require the posting of initial and variation margin. The ISDA standard approach (SIMM) provides a way for computing the initial margin. It involves computing sensitivities of the contracts with respect to several market factors. In this paper, the authors extend the well known LSMC technique to efficiently estimate the sensitivities required in the ISDA SIMM methodology.

Date: 2021-10
New Economics Papers: this item is included in nep-rmg
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