Initial Margin for Non-Centrally Cleared OTC Derivatives

Dominic O'Kane: This report provides a detailed overview and analysis of the forthcoming new framework to be used by large financial institutions to determine initial margin (IM) and variation margin (VM) payments when trading non-cleared over-the-counter (OTC) derivatives.

Author(s) :

Dominic Okane

Dominic O'KaneAffiliate Professor of Finance, EDHEC Business School

Presentation :

Coming into effect in September 2016, this new framework is based on the recommendations of the BCBS/IOSCO Working Group on Margin Requirements (WGMR)1 which has been set out in [BIS2015]. This framework has been in development since it was first proposed following the Pittsburgh G20 meeting in 2009. It was a response to the events of September 2008 which saw the bankruptcy of Lehman Brothers, the bailout of AIG and the federal takeover of Fannie Mae and Freddie Mac, all of whom had large exposures to the OTC derivatives market. In the US, the framework has been implemented by the Commodities Futures Trading Commission (CFTC) within the framework of the Dodd-Frank Act Title VII. In Europe the rules will be implemented within the new EMIR directive of the EU.
Pdf
Initial Margin for Non-Centrally Cleared OTC Derivatives...
(5.34 MB)
Type : Position paper
Date : le 13/07/2016
Extra information : For more information, please contact EDHEC Research and Development Department [research@drd.edhec.edu]
Research Cluster : Finance

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