LCH SA Proposes Updates to CDSClear Risk Framework
AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.
The proposed changes by LCH SA adjust the risk framework for CDSClear, focusing on the CDSClear Margin Reference Guide and Default Fund Reference Guide. Key updates include shortening the lookback period to improve risk calculations and reducing the size of the default fund. These changes aim to manage risk more effectively while maintaining stability during market extremes.
AI-generated summary. May contain errors. Refer to official sources for legal decisions.
Key Changes
- Shortening the lookback period to improve risk calculations
- Reducing the size of the default fund
- Implementing a new common LSEG template
Obligations
What this law requires
LCH SA must implement a 10-year rolling lookback window for Spread Margin calculations, incorporating a fixed three-year period and maintaining relevance by adjusting historical returns from 2007.
LCH SA must amend the CDSClear Margin Reference Guide to include a fixed size for the lookback period in the Spread Margin calculation.
LCH SA must change the risk measure for the Spread Margin floor from Expected Shortfall to Value at Risk (VaR) for unscaled returns.
LCH SA must revise the CDSClear Default Fund Reference Guide to ensure that stress scenarios meet the plausibility criteria defined in the LCH Financial Risk Adequacy Policy.
LCH SA must calculate Profit and Loss (P&L) over five days for each scenario in the Spread Margin to enhance margin calculation efficiency.