ISDA releases Standard Initial Margin Model (SIMM) for Non-Cleared Derivatives

In order to facilitate the introduction of final BCBS-IOSCO guidelines for “Margin requirements for non-centrally cleared derivatives”, published September 2, 2013 (BCBS 261, “the Guidelines”), ISDA is proposing a standard initial margin model (SIMM) which could be used by market participants. A common methodology would have several key benefits to the market, such as permitting timely and transparent dispute resolution and allowing consistent regulatory governance and oversight. In order to realize these benefits, agreement between market participants and global regulators on several key assumptions will be required. These assumptions, which are detailed in this document, are:

1. General structure of margin calculations
2. Requirement for margin to meet a 99% confidence level of cover over a 10-day standard margin period of risk
3. Model validation, supervisory coordination and governance 4. Use of portfolio risk sensitivities (“Greeks”) rather than full revaluations 5. Explicit inclusion of collateral haircut calculations within the portfolio SIMM calculation

The full document is available here.

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