“For 40 years, SPAN has enabled people to think about margin in a simple way; contract (or strategy) multiplied by a margin rate. With VaR models, this approach no longer works. Margin is calculated at portfolio level, not contract level, meaning transparency will disappear – margin models will be ‘black box’.”
Jo Burnham, Risk and Margin SME at OpenGamma, SPAN to VaR: The Impact on Commodity Margin
SPAN is a well respected methodology with broad industry and regulatory support that has been the market standard since the 1980’s. But with CME moving away from SPAN by 2022, most CCPs will likely seize the same opportunity to move away from the limitations of SPAN and introduce their own VaR models.
New VaR models are complex, and the choices of each CCP will create significant differences. For every firm that uses derivatives, margin will become harder to explain, predict and allocate.
So which firms are set to win – and which to lose?
Inside we cover:
- The Impact of VaR on Traders, Treasury & Operations
- New tools for managing VaR Margin
- How CCPs design their VaR methodologies
- Quantifying the impact of different model choices
Download our ebook, here >
Recent posts
- Choice of CCP in focus
- Are you ready for the ICE Clear move to VaR?
- How UMR is impacting the margin models used by Prime Brokers
