LCH RepoClear SA has upgraded its Value at Risk (VaR) methodology across its core euro debt markets.
The Paris-based repo and cash bond clearing arm of LCH Group went live with this new margin framework on 20 June across the 13 euro-currency fixed income markets serviced by this clearing entity.
The new VaR model is designed to enable better recognition of members’ diversified portfolios and to incorporate adjusted pro-cyclical measures to support stability and predictability of margin requirements.
This also provides greater capacity to respond to market volatility designed to reduce events that trigger potential liquidity stress within the market.
This model will also apply to LCH SA’s €GC+ segment, supporting clearing of euro general collateral baskets, following its proposed integration with RepoClear SA which is expected to finalise in Q4 2022.
Commenting on the development, Olivier Nin, head of first line risk for RepoClear Collateral and Liquidity at LCH SA says: “Through its anti-procyclical features LCH SA’s new margin framework provides the market with stability and predictability in period of market volatility.
“The model, based on both historical and theoretical events, also enables LCH SA’s members to materialise diversification in their portfolios when trading and clearing across multiple debt markets”.
