Equity Risk Analysis (LCH.ERA)
Risk Margin is calculated using ERA (Equity Risk Analysis). The prime initial margin methodology is a portfolio approach using historical prices.
LCH Ltd 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 Ltd after discussions with a member advisory group late in 1999 and was subsequently approved by the LCH Ltd Limited Risk Committee.
If you would like a copy of PC ERA to calculate margins please contact those mentioned in the contacts section.
Parameter files are produced daily and placed under a secured area of the LCH website. Access is for LCH EquityClear members only. For all access requests please contact Ian.Mackenzie@lch.com
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.Clearnet 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.
Mail Web Administrator with suggestions or comments or call the Help Desk on 020 7426 7200.