LTD Margin Methodology
A tailored approach to measuring, monitoring and managing market risk
The LCH robust risk management framework – underpinned by a team of over 50 dedicated risk managers – affords exceptional levels of protection to clearing members.
Initial and variation margin is collected from LCH members; should they fail, this margin is used to fulfil their obligations.
The amount of margin is decided by LCH risk management teams, who assess a member's positions and market risk on a daily basis.
Initial margins are recalculated at the close of business day using the London SPAN algorithm, which is an adaptation of the SPAN method developed by CME.
Risk is calculated using Equity Risk Analysis (ERA). The prime initial margin methodology is a portfolio approach to using historical prices.
LCH proprietary PAIRS margin methodology is used for the calculation of margin for OTC interest rate derivatives and listed rate derivatives.