Money Market and Foreign Exchange Margin
Initial Margin
Initial Margin is the amount of collateral that PUVA CCP Members need to deposit to cover potential losses that may arise from a default. Initial Margin is calculated to account for the worst possible losses that may occur within a certain period with a certain confidence level based on historical data. Initial margin is calculated on a portfolio basis using the Historical Value at Risk (HsVaR) method with the following parameters for DNDF products:
- Lookback Period: 500 days
- Confidence Level: 99%
- Holding Period: 5 days
- Decay Factor: 97%
Variation Margin
Variation Margin is the funds deposited by CCP Members to KPEI for exposures caused by daily market price changes of PUVA Transactions. In general, Variation Margin is calculated using the following formula:
Variation Margin = Mark to Market t0 − Mark to Market t−1