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HKSCC_PFMI: Risk management Framework (Principle 4: Credit Risk (apply…
HKSCC_PFMI:
Risk management Framework
Principle 4: Credit Risk
(apply to Mkt Risk also)
Rates & FX Guarantee Fund
Principle 6:
Initial Margin
based on
VaR model
with at least 99%
single-tailed confidence
to cover 5-day's P&L of portfolio
Principle 6:
Variation Margin
Routine calls
If current exposure >
intra-day VM limit
Ad Hoc calls
measured by MtM
of contracts every 30 mins
Principle 6:
Additional Margin
fails to comply with Min Capital Requirement
wrong-way risk concerns
Holiday Margin
Major functions of
OTC Clearing and
Settlement System
(
OCASS
)
Trade valuation and
Margin calculation
To
calculate
...
Initial Margin
Variation Margin
Additional Margin
“OTC Account Services
Information System”
(OASIS)
Review Effectiveness of
RM Policies, Procedures
and Systems
Head of FIC &
OTC Clearing RM Department
meets
at least quarterly
with
RM Committee
and OTC Clear Board
update on OTC Clear’s
risk exposures
adequacy of Initial Margin and
Rates & FX Guarantee Resources
Margin requirements
Back-testing results
for
Initial Margin model
projected
stress-test losses
Principle 4:
Stress Testing
Reverse
stress-testing
Quarterly
Stress-testing
and
Back-testing
Margin Models
Daily
Initial
Margin
Model
Back-testing
exceedance will be recorded
if hypothetical Initial Margin
is insufficient to cover the
hypothetical loss
Sensitivity Analysis
(of Margin
coverage
)
Parameter
Out-of-sample data
Data for
hypothetical
scenarios
by doubling
the volatility
Effectiveness assessed
at least monthly
results are reported
monthly