A possible methodology for determining the initial margin

Our article presents a methodology for determining the initial margin requirement that complies with the EMIR regulation in effect since 2012, while also taking into account market participants’ demands and needs in connection with establishing the initial margin. The task of central counterparties that operate behind stock exchanges is to take over the counterparty risk from market participants. In order to manage the emerging risks, central counterparties operate a multilevel guarantee system, one key element of which is the initial margin. From the perspective of market participants, the main requirement is that the value of the margin reflect market developments and remain stable over time, if possible. Another requirement is that its value be determined objectively, so that market participants can easily reproduce it, i.e. it should contain as few expert decisions as possible and should be uniform with respect to all product types. We will show in the article through the example of some securities how a potential methodology is structured, and how the individual parameters can be determined in a way that satisfies the interests and the requirements of all stakeholders, i.e. regulators, market participants and the central counterparty.