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What the models for computing margin requirement for central counterparty (CCP) and non-central cleared OTC derivatives.

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  • $\begingroup$ I understand you ask about initial margin. Each CCP has their respective model afaik, whereas the bilateral ‚standard‘ is ISDA SIMM (Standard initial margin model). $\endgroup$ – Kermittfrog May 7 at 17:44
  • $\begingroup$ yes. Thanks but there any restrictions or guides put forward for CCP to follow in terms of those initial margin model. $\endgroup$ – user460329 May 7 at 17:55
  • $\begingroup$ Here in Europe there are differential regulatory requirements for CCP and bilateral initial margin models. Off the top of my head, the margin period of risk for an bilateral model is 10 days, and I think for CCPs it is 5 days. $\endgroup$ – Kermittfrog May 7 at 19:12
  • $\begingroup$ Unfortunately, I cannot fully grasp what you are asking- if you could adjust your question we might be able to help. $\endgroup$ – Kermittfrog May 7 at 19:17
  • $\begingroup$ Thanks. You have answered my question. My main point was that if each CCP have specific model, I am wondering if counterparties would not try to find out, which CCP would require lowest IM, and then most counterparties would flock there, causing concentration risk if there is no order guides beside the MPOR. $\endgroup$ – user460329 May 8 at 7:01
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Agree with @Kermittfrog, your request is not very clear. A common methodology for calculating initial margin for uncleared OTC derivatives is SIMM.

CCP's all have their own method. For this reason, interest rate swap quotes are frequently received for clearing on CME or LCH for example. Also, many data providers have CME/LCH basis due to IM imbalances at these CCPs so that stripped curves can be transformed accordingly.

For example, LCH uses this, which is as the website states proprietary (meaning exact calculations are difficult to obtain). E.g. Bloomberg offers a direct API link to LCH (and others) for IM calculation. Same applies for CME.

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