News: LCH Swapclear Margin, the need for change and the impact

27 May 2013 | Amir Khwaja

LCH SwapClear have implemented a change in their Initial Margin methodology and this article will discuss three elements that constitute the change:

  1. Historical look-back period, increased from 5Y to 10Y
  2. Relative scenarios changed to absolute scenarios
  3. Worst Loss to Expected Shortfall

For further details on the need for these changes and their impact, please click here Amir Sources:


Reblogged this on Carl A R Weir's Blog.

Jon - SwapClear's margin overhaul was primarily a function of clearing members telling the CCP that its IMs were too low. There's been a big drive of late from clearing members to emphasise "defaulter pays" and for shifting risk away from the default waterfall and back to the client and hence higher IMs.

Does anyone know what drove the change to happen i.e. internal improvements or external input from regulators, buy side, sell side firms or a combination and what the rationale was (prudent risk management, competitive margin levels, enabling portfolio margining, something else)?