The Dodd-Frank Act in the US and the EMIR Directive in Europe have mandated the requirement for Interest Rate Swaps to be cleared at Clearing Houses. One of the most significant differences in market practices from this change is the requirement to post collateral to meet the Initial Margin requirement.
“Initial Margin for Cleared Swaps” was presented at the Marcus Evans Central Counterparty Clearing Workshop, London, Feb 6th-7th, 2013.
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One point to note: I believe SwapClear moved recently from VaR based to Expected Shortfall based IM. I’m not sure the full rationale but there has been commentary that ES is a better metric than VaR e.g. because it measures the expectation of loss more directly and because ES(Portfolio1 + Portfolio2) is always IM(portfolio1) + IM(portfolio2) in some cases!)
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