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HVaR - calculation initial margin

In order to manage the clearing risk of OTC transactions, margins and contributions to the clearing fund are calculated based on the historical Value at Risk (VaR) simulation model. OTC risk is measured as VaR for a five-day holding period at a confidence level of 99.5%. Risk is measured based on a ten-year time horizon.

The margin requirement is equal to HVaR (historical value at risk) for a given account based on the relevant parameters.

KDPW_CCP HVaR parameters
Parameter

Value

Confidence level

99,5%

Liquidation period

5 days

Observation window

10 years

Decay rate

equal (all historical observations have the same weights)

Perturbation method

- interest rates - additive method with scaling of the liquidation period
- FX rates - multiplicative method with scaling of the liquidation period

Absolute value

no

Compensation

yes, for a given product. The products are as follows: 
-  PLN interest rate derivatives
-  EUR interest rate derivatives 
 - PLN repos and securities sale


To limit the procyclicality of margins, KDPW_CCP follows the approach defined in Article 28(1c) of Regulation (EU) No 153/2013 and determines margins based on a 10-year lookback period. Margins are calculated as follows:
  • generating scenarios based on historical market data;
  • valuation of the portfolio under defined historical scenarios and calculation of potential gains/losses.

The method of calculating margins and the rules of valuation of derivatives and repo transactions (including discount and forward curves) are laid down in Appendix 6 to the Detailed Rules of the OTC Clearing System.

 Collateral table *
* Last message update: 2019-11-15