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Eurex Clearing
1. Introduction
As part of a regular review of concentration risk handling in the risk methodology, Eurex Clearing has recalibrated the Liquidity Adjustment for ETD products as well as all bonds resulting from Repo and FWB Transactions eligible for portfolio margining. The affected model parameters comprise Market Capacities and Liquidity Factors across all Prisma Liquidation Groups. The recalibration follows standard calibration methodology.
2. Required action
No specific actions are required by clients. The recalibration is a regular update and does not encompass changes to the model.
3. Details of the initiative
Eurex Clearing has a prudent risk framework in place to mitigate counterparty credit risks. Concentration risks are covered as part of this framework. Next to Concentration Risk limits, Eurex Clearing’s Prisma methodology comprises a dedicated Liquidity Adjustment that accounts for this type of risk. The Liquidity Adjustment component is designed to capture the potential additional costs when liquidating large and concentrated portfolios.
As part of a regular review of concentration risk handling in the risk methodology, Eurex Clearing has recalibrated the Liquidity Factor parameters with a focus on the observable tradable volumes in the market, as well as availability of underlying cash market liquidity pools. The recalibration incorporates the input received from Liquidity Surveys that were carried out separately for each Asset Class.
All Prisma ETD Liquidation Groups and the bonds under portfolio margining will be affected.
Unless the context requires otherwise, terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the Clearing Conditions or FCM Clearing Conditions of Eurex Clearing AG, as applicable.
Further information
Recipients: | All Clearing Members, ISA Direct Clearing Members, Disclosed Direct Clients of Eurex Clearing AG and vendors | |
Target groups: | Front Office/Trading, Middle + Backoffice | |
| Contact: | Risk Exposure Management, tel. +49-69-211-1 24 52, risk@eurex.com | |
| Web: | www.eurex.com/ec-en/ | |
| Authorized by: | Dmitrij Senko |