Insights, tips and industry commentary from the team behind the world’s first production-grade open source risk management platform.

Marc Henrard

Comparing SIMM vs. CCP margin delivers unexpected results

On 9th June, it became clear that the European Union would delay the implementation of the mandatory bilateral margin. See for example the Risk article or the Bloomberg article. But for the rest of the world, the 1 September 2016 date is still a major deadline.

Marc Henrard

25% increase in cleared swaps initial margin in the 5 days since Brexit

On Tuesday, 28th June, I posted a blog post about the impact of Brexit on OTC swaps cleared margin.

We anticipated that the impact of Brexit would progressively increase in magnitude over the subsequent days.

This post shows results from the period from 23rd to 29th June, and shows how the impact has now hit 25% for long-dated swaps change over this period. The analysis assumes the same 30Y GBP swap position as the previous post.

Marc Henrard

The impact of Brexit on your next cleared swaps margin call

In the run-up to the Brexit vote, many firms trading OTC interest rate swaps were understandably worried about the impact of short term market volatility on the margin that they would need to post to their clearing houses.

Our aim in this post is to share some of the analysis that we did prior to the vote, and are continuing to run on an hour by hour basis, with the objective of helping firms to assess the liquidity impact and to understand the key drivers of changes in margin.

Jonathan Senior

Introducing OpenGamma’s next-generation market risk library

The OpenGamma Platform was launched in 2011 to provide standardised models and market risk functionality to the industry, as open source software. It was designed to support a range of use-cases, and many people we engaged with saw its potential in solving both buy-side and sell-side risk requirements.

The deadline for CAT 2 frontloading is fast approaching: have you quantified the impact of clearing?

The frontloading deadline for Category 2 OTC clearing (21 May) is just around the corner, prompting many to start anlaysing the most cost-effective way to cope with this new requirement. 

As the provider of margin calculation software to both CCPs and Tier 1 banks, we are uniquely placed to help asset managers prepare for OTC Clearing. Here’s a great example of how we have just helped one of our investment management clients to work out the true cost of clearing.

Our new hosted service makes margining analysis accessible for all

With regulation driving derivatives trading firms to make decisions on their approach to mandatory OTC clearing, they will be weighing up CCPs’ competing claims about potential cost savings that can be derived from cross-margining. However, attempting to separate the hype from the reality can be difficult, while at the same time potentially significant given the possibility of up to 35% reduction on the hundreds of millions of dollars in initial margin posted by even medium sized firms.

Marc Henrard

Your questions answered: new Q&A available on our MVA research

We’ve received a number of follow-up questions on the back of the research paper on MVA we published last month in collaboration with University College London.

We’ve provided answers to the questions below, and will continue to update with answers to your questions as they come in.  Please send your questions to Marc Henrard.

Results of our margining survey

In our last newsletter we asked readers to participate in a survey on margining. This produced some interesting results in regard to trends we see gaining momentum in the market in the near future: the rise of lifetime initial margin calculations, and an increasing need for independent CCP model implementation.

Marc Henrard

New OpenGamma research with UCL supports practical solutions for MVA

As the market is well aware, initial margin will be charged on both cleared and non-cleared OTC (for large dealers by Sep 2016). This ties up large amounts of high quality collateral which in turn creates a significant funding and capital costs for holding OTC positions. Initial margins will be charged by the CCP daily for the full holding period of the trade (potentially to maturity) and it is this long-term nature of initial margin that makes these costs difficult to estimate.

Let’s be clear: Margining is no longer just a sell-side headache

When the deadline for regulatory compliance was extended to Q4 2016, many buy-side firms may have gratefully shelved any nascent worries about OTC derivatives clearing.