The initial margin of a participant shall cover the potential credit exposure arising from its default for a central counterparty due to expected price movements over an appropriate time horizon with a confidence level of at least 99%. The confidence level for over-the-counter derivatives must be at least 99.5% unless they show the same risk characteristics as exchange-traded derivatives.1
The appropriate time horizon pursuant to paragraph 1 corresponds to the period from the last variation margin payment up to the expected close-out or hedging of positions in the event of a participant’s default. This horizon shall be at least two business days. For over-the-counter derivatives, the horizon shall be at least five business days, unless they show the same risk characteristics as exchange-traded derivatives.2
A central counterparty shall base its initial margin calculation on price movements in the financial instruments underlying the positions over at least the previous 12 months. It may choose other and additional periods if these result in higher initial margin.
If a central counterparty nets the positions of a participant when calculating that participant’s initial margin, then the assumptions applied with regard to the correlations in the financial instruments underlying these positions shall also be appropriate under extreme but plausible market conditions.
The variation margin shall cover the current credit exposure arising from realised price movements, taking into account the predefined thresholds.
Footnotes
Amended by No I of the SNB O of 26 Nov. 2015, in force since 1 Jan. 2016 (AS 2015 5307). ↩
Amended by No I of the SNB O of 26 Nov. 2015, in force since 1 Jan. 2016 (AS 2015 5307). ↩
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