Risk Margin is calculated using ERA (Equity Risk Analysis). The prime initial margin methodology is a portfolio approach using historical prices.
LCH Limited has developed an algorithm, LCH ERA, for the calculation of margin for cash equities and equivalent linear instruments. The LCH ERA algorithm was developed by LCH Limited after discussions with a member advisory group late in 1999 and was subsequently approved by the LCH Limited Risk Committee.
To review our ERA Technical Information Pack (TIP) please click hereIf you would like a copy of PC ERA to calculate margins please contact those mentioned in the contacts section.
Note: there are two sets of parameter files for each day. EquityClear GMT plus 8 should only be selected for members requiring risk information relating to markets operating in the Asia-Pacific region.
Five files are required to calculate ERA margins:
The Bucket file contains details of the way in which different groups of equities should be handled within the ERA algorithm. This includes parameters relating to the calculation of historical price changes.
The Equity file assigns individual ISINs to buckets for initial margining purposes. It also includes parameters required in the calculation of variation margin.
The Exchange Rate file includes the exchange rates used in the ERA calculation. These are needed to convert values to the LCH Limited base currency, which is currently sterling.
The Global file details the global parameters used by the ERA calculation. This includes details of the date and margin run (intra day or end of day) to which this group of files refer.
The Price file contains price histories for all equities which belong to a portfolio style bucket for margining purposes. In addition it contains prices for flat rate bucket initial margin and variation margin calculation.
Because of the size of the price histories, all files are provided in compressed (using pkZip) format.
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