Systems and methods for determining an initial margin

Patent metadata

Field	Value
Publication number	US-11216886-B2
Application number	US-202117221052-A
Country	US
Kind code	B2
Filing date	Apr 2, 2021
Priority date	Jun 17, 2013
Publication date	Jan 4, 2022
Grant date	Jan 4, 2022

Abstract

An exemplary system according to the present disclosure comprises a computing device that in operation, causes the system to receive financial product or financial portfolio data, map the financial product to a risk factor, execute a risk factor simulation process involving the risk factor, generate product profit and loss values for the financial product or portfolio profit and loss values for the financial portfolio based on the risk factor simulation process, and determine an initial margin for the financial product. The risk factor simulation process can be a filtered historical simulation process.

First claim

The invention claimed is:

1. A method of efficiently modeling datasets, the method comprising:
receiving, by a system comprising one or more processors configured to execute machine-readable instructions stored in a non-transitory storage medium, risk factor data and additional data associated with one or more financial portfolios;
generating, by the system, a buffered margin by applying a correlations stress component to an initial margin for the one or more financial portfolios to account for sudden increases or decreases in the risk factor data;
determining, by the system, a portfolio level liquidity risk for the one or more financial portfolios based on the additional data and the buffered margin;
executing, by the system, one or more assessment processes on the portfolio level liquidity risk to account for price movements; and
executing, by the system, one or more assessment processes on the portfolio level liquidity risk to account for market volatility.

2. The method of claim 1 , further comprising:
executing, by the system, a filtered historical simulation process comprising applying a scaling factor to historical pricing data for the risk factor data to resemble current market volatility.

3. The method of claim 2 , further comprising:
generating, by the system, portfolio profit and loss values for the one or more financial portfolios based on results of the risk factor simulation process, wherein the portfolio profit and loss values are used to determine the initial margin.

4. The method of claim 2 , further comprising:
retrieving, by the system, the historical pricing data for the risk factor data;
determining, by the system, statistical properties of the historical pricing data; and
performing, by the system, de-volatilization and re-volatilization of the historical pricing data to adjust the historical pricing data for the current market volatility.

5. The method of claim 2 , further comprising:
executing, by the system, a volatility forecast comprising a volatility floor configured to adapt to current market environment conditions.

6. The method of claim 5 , wherein the volatility forecast comprises a stress volatility component associated with market stress periods.

7. The method of claim 5 , wherein the volatility forecast includes an anti-pro-cyclicality component (APC) configured to mitigate pro-cyclicality risk.

8. The method of claim 3 , wherein generating the portfolio profit and loss values comprises:
generating, by the system, one or more risk factor scenarios based on the results of the risk factor simulation process;
generating, by the system, one or more instrument pricing scenarios based on the one or more risk factor scenarios;
generating, by the system, one or more profit and loss scenarios at an instrument level, based on the one or more instrument pricing scenarios; and
aggregating, by the system, the one or more profit and loss scenarios at the instrument level to form one or more profit and loss scenarios at a portfolio level.

9. The method of claim 1 , further comprising:
applying, by the system, a portfolio diversification benefit to the initial margin, the portfolio diversification benefit comprising a predetermined benefit limit.

10. The method of claim 1 , further comprising:
determining, by the system, a concentration charge and a bid-ask charge based on one or more equivalent portfolio representations of the one or more financial portfolios; and
determining, by the system, the portfolio level liquidity risk based on the combination of the concentration charge and the bid-ask charge.

11. The method of claim 10 , wherein the one or more equivalent portfolio representations comprise a first representation based on a delta technique and a second representation based on a value-at-risk (VaR) technique.

12. The method of claim 1 , further comprising:
generating, by the system, one or more synthetic datasets configured to model at least one of a benign condition and a regime change condition.

13. The method of claim 1 , wherein the buffered margin is generated by a margin model defined by the machine-readable instructions and executed by the one or more processors.

14. The method of claim 1 , wherein the determining the portfolio level liquidity risk and the executing the at least one assessment process is performed by a liquidity risk charge (LRC) model defined by the machine-readable instructions and executed by the one or more processors.

15. The method of claim 14 , further comprising:
testing, by the system, one or more of the margin model and the LRC model according to one or more testing categories.

16. The method of claim 15 , wherein the one or more testing categories comprise one or more of fundamental characteristics, backtesting, pro-cyclicality, sensitivity, incremental addition of one or more model components, model comparison with historical simulation, and assumption backtesting.

17. The method of claim 1 , wherein the one or more financial portfolios comprise one or more financial products and one or more currencies.

18. The method of claim 17 , further comprising:
applying, by the system, a currency allocation to the initial margin across the one or more currencies.

19. The method of claim 17 , wherein the one or more financial products comprise one or more of a non-linear financial product and a linear financial product.

20. The method of claim 19 , further comprising:
empirically modeling, by the system, the non-linear financial product and the linear financial product by a same empirical modeling process.

Assignees

• Intercontinental Exchange Holdings Inc

Inventors

• Maruyama Atsushi
• Duinstra Boudewijn
• Schlegel Christian A M
• De Almeida Daniel R
• Cerezetti Fernando V
• Medina Gabriel E S
• Issa Ghais
• Yekutieli Iddo
• Drean Jerome M
• Keppeler Marcus
• Mrabet Rafik
• Pounds Stephen R
• Jiang Wen
• Hu Yanyan
• Yang Yunke

Classifications

• G06Q40/06 Primary

  Asset management; Financial planning or analysis · CPC title