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Risk ManagementMargin

Margin

  • JSCC requires Clearing Participant to deposit margin, which is collateral to cover loss arising from that Clearing Participant default.
  • For listed derivatives, CDS, IRS, and OTC JGB, open positions are marked-to-market using the most recent price at least once a day, following which variation margin is exchanged with Clearing Participants. This process ensures that current exposure is covered in a timely manner. For cash products, current exposure is covered by initial margin.
  • Besides, initial margin is calculated for each Clearing Business using a method appropriate for that business, with a confidence level of at least 99% of potential future exposures for all products.
  • Calculation of initial margin for each Clearing Business are as follows:

Calculation of Initial Margin

 

Model Type

Calculation Method

Reference Period

Holding Period

Confidence Level

Update
Parameters / Scenarios

Cash Products

VaR

Historical Simulation

250 days

1 day

99%

Daily

Listed Derivatives

SPAN®

Parameter Method

4 or 54 weeks

1 day

99%

Weekly

CDS

Expected Shortfall

Historical Simulation

750 day

5 days

99.5%

Daily

IRS

Expected Shortfall

Historical Simulation

1,250 days

5 days*

99.5%

Daily

OTC JGB

POMA

Delta Method

250 days

3 days

99%

Weekly

* 7 business days for Clients

  • JSCC performs daily backtesting of each account for each Clearing Business using required margin amounts and losses based on actual price fluctuations, in order to confirm that the target confidence level is achieved. JSCC reports backtesting results to the Risk Oversight Committee on a monthly basis, to the Board of Directors on a quarterly basis, and to Clearing participants via the advisory committees of each Clearing Business on an annual basis.
  • Risk Management Office of JSCC validates its overall risk management models at least annually, and if necessary, each Clearing Business reviews its model. Within these validations, JSCC evaluates the policies and calculation methods of the risk management framework, including margining and clearing fund, based on the circumstances. Validation results are reported to the Board of Directors and the advisory committees of each Clearing Business.