Beyond Uncleared Margin Rules

Beyond Uncleared Margin Rules

Using ISDA SIMM for intra-day margin optimization


Beyond UMR: Calculating Sensitivities and IM under ISDA SIMM™

Learn how firms can prepare and minimize the impact of upcoming changes to Uncleared Margin Rules (UMR).

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Maria Levanti, Senior Director, Pricing & Analytics, ICE Data Services

This whitepaper examines the effectiveness of using the ISDA SIMM calculation for intra-day margin optimization.

Exec Summary:

  • Initial margining for over-the-counter trades aims to mitigate counterparty risk exposure by having counterparties post collateral to account for potential future credit losses
  • The push towards central clearing and the introduction of uncleared margin rules has changed the risk management landscape significantly for less sophisticated financial institutions
  • ISDA identified the need for a uniform initial margin method and introduced the ISDA SIMM calculation, a common methodology for calculating initial margin for non-centrally cleared derivatives which reflects market risk inherent in a portfolio and helps minimize counterparty disputes
  • The buy side no longer need to rely on counterparties, but can perform their own initial margin calculation by engaging with a licensed ISDA SIMM vendor such as ICE Data Services
  • It has become increasingly clear that initial margin can be a valuable risk management tool for more than just regulatory compliance

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