Template-Type: ReDIF-Article 1.0

Author-Name: Marcell Béli
Author-Email: beli.marcell@gmail.com

Author-Name: Kata Váradi
Author-Workplace-Name: Corvinus University of Budapest
Author-Email: kata.varadi@uni-corvinus.hu
Author-Person: pvr19


Title: A possible methodology for determining the
initial margin

Abstract: 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.

Classification-JEL: G15, G17, G18
Keywords: central counterparty, initial margin, EMIR, procyclicality
Pages: 119–147
Volume: 16
Issue: 2
Year: 2017
File-URL: http://english.hitelintezetiszemle.hu/letoltes/a-possible-methodology-marcell-beli-kata-varadi.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:16:y:2017:i:2:p:119-147