Value-at-Risk (VaR) Margin Methodology

LME Clear will be implementing Value-at-Risk (VaR) margin methodology, subject to regulatory approval.

VaR is a widely adopted risk methodology, used in many asset classes by various central counterparties and other financial institutions.

As part of our market-wide Discussion Paper engagement process, we outlined the analysis we’ve undertaken into whether members and clients would benefit from a custom-designed VaR methodology to calculate initial margin for the LME market. Both the analysis and the Discussion Paper feedback confirmed that members and their clients are keen for the LME to pursue VaR, and we will work towards this as part of our Strategic Pathway.

We've put together a list of frequently asked questions with further details about VaR and what the change in margin methodology means.

We will update this page as frequently as possible and communicate any changes or further information via the usual channels. Please bookmark this page and check back for more details.

We will update this section with events and trips where you can hear more about our plans for VaR margin methodology. Use the links below to find out more and register.

 

Tuesday 27 November 2018 - Singapore Gala, Singapore

You can find out more about VaR as part of our free half-day Singapore Gala taking place at the Westin Singapore. Our team will also be available for meetings so if you’d like to talk to them on an individual basis please get in touch.

Register for the Singapore Gala

We have created two working groups which will be involved in the initial formative phases of the project: the VaR Working Group and the VaR Methodology Working Group. These groups will provide industry input and feedback on the methodology approach, requirements to ensure a smooth transition and the information required by members and clients. Information from the working groups will be shared wherever possible to ensure transparency on our discussions and approach.

VaR Working Group

Representatives from across our member firms have joined the VaR Working Group, which will runs on a regular basis to discuss the LME’s approach to VaR, and to gather feedback on the methodology, timelines, the transition process and the information that will be made available to members and their clients throughout the process.

Attendees are intended to be representative of the wider LME membership.

VaR Methodology Working Group

The VaR Methodology Working Group is open to all clearing members to attend. These meetings focus on the more technical aspects of the methodology changes including the how margins will be calculated under VaR. Attendees are generally technical experts from member risk teams.

LME CLEAR 保证金算法的改变对你意味着什么. 

关于LME Clear改用「风险价值」(VaR)计算初始保证金的简介

VaR是很多清算所以及其它金融机构在评估不同类型资产风险值时所普遍采用的风险计算方法。根据LME Clear的分析结果显示,若使用针对于LME市场所量身订制的VaR模型来计算LME市场的初始保证金,LME的会员及客户普遍会因为这一更加有效的风险计算而受惠。我们在《LME战略讨论文件》中亦有阐述这一点,而所得到的市场反馈表示会员及其客户非常支持LME转用VaR计算其初始保证金。LME在其《战略路径》中进一步确定了此计划。

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Contact us

For further information about VaR please get in touch with the team