AbstractThis paper presents a validation framework for collateral requirements or margins on a derivatives exchange. It can be used by investors, risk managers, and regulators to check the accuracy of a margining system. The statistical tests presented in this study are based either on the number, frequency, magnitude, or timing of margin exceedances, which are defined as situations in which the trading loss of a market participant exceeds his or her margin. We also propose an original way to validate globally the margining system by aggregating individual backtesting statistics obtained for each market participant.
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Bibliographic InfoPaper provided by HAL in its series Working Papers with number halshs-00746274.
Date of creation: 28 Oct 2012
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Collateral Requirements; Futures Markets; Tail Risk; Derivatives Clearing;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-FMK-2012-11-11 (Financial Markets)
- NEP-RMG-2012-11-11 (Risk Management)
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