LCH RepoClear goes live with new VaR model

  • Value at Risk (VaR) as the new risk methodology will be applied across 13 euro debt markets and replaces the SPAN-like methodology
  • VaR offers better recognition of diversified portfolios, supports stability and predictability of the margin requirement, and enhanced capacity to adapt to market volatility
  • Reaffirms RepoClear SA’s commitment to improving margin efficiency for its members

LCH RepoClear’s Paris-based entity announced it has now gone live with its enriched Value at Risk (VaR) risk methodology, applied across the 13 Euro debt markets cleared by the service. The new risk methodology is based on three key pillars: better recognition of members diversified portfolios; adjusted anti-procyclical measures to support stability and predictability of the margin requirement; and an enhanced capacity to adapt to market volatility, aimed at reducing events of increased liquidity requirements from the market.

The VaR based framework went live on 20 June 2022, as part of RepoClear SA’s continued commitment to improving margin efficiency by enabling members with diversified and balanced portfolios to minimize costs and direct resources to adapt to new market dynamics.

Olivier Nin, head of First Line Risk for  RepoClear, Collateral and Liquidity at LCH SA, said in a statement: “Through its anti-procyclical features LCH SA’s new margin framework provides the market with stability and predictability in periods of market volatility. The model, based on both historical and theoretical events, also enables LCH SA’s members to materialise diversification in their portfolios when trading and clearing across multiple debt markets.”

The VaR model will also apply to LCH SA’s €GC+ segment following its integration with RepoClear SA, expected in Q4 2022.

Source

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