Clarus Financial Technology

ISDA SIMM v25a the first off-cycle release

Version 2.5a

ISDA has published ISDA SIMM v2.5a with a re-calibration of interest rate risk weights only.

This is an off-cycle release, due to the higher interest rates volatility observed in 4Q 2022, compared to that in 2019-2021 and the stress period of Sep-08 to Jun-09; the time period used for the calibration of v2.5.

Quarterly industry monitoring of actual portfolios has led to the need for an off-cycle release, v25a in July 2023, almost 4-months earlier than the next annual release (v2.6) scheduled for December 2023.

CHARM

Clarus customers using CHARM or Microservices are able to easily run SIMM v2.5a and compare the margin with SIMM v2.5 for their actual or hypothetical portfolios, before the go-live date:

Comparison of SIMM v25 with 2.5a for hypothetical portfalios

Portfolios with risk pre-dominately in Commodity, Credit, Equity or FX would see no change or non-material changes of less than 1%.

Portfolios with material Interest Rate Risk (e.g. Swaptions, Caps/Floors, Interest Rate, Cross-Currency Swaps) would see signifciant increases, most likely in the 6% to 14% range.

Eyeballing the new re-calibrated risk weights, we can observe the following:

This gives us an idea of which risk factors will result in increases and the ballpark of the possible increase. However the only way to really know is to calculate SIMM v2.5a on your actual portfolios and compare results.

CHARM makes this easy to do, months before the actual change.

Foresight is fore-warned and allows for better planning of collateral requirements and pre-emptive action.

Stay informed with our FREE newsletter, subscribe here.

Exit mobile version