The margin requirement will be calculated on a daily basis at the clearing account level. The objective of margining is to provide adequate cover for the event that ADECH is called to meet the obligations of a defaulting member. Collateral against margin requirements should be posted in the form of pledged Drachma deposits (Greek government bonds and foreign currency deposits will also be accepted in the future). Daily margin calls should be settled by posting additional pledged cash in the margin account. Any excess margin amounts will be released from the margin accounts.
RIVA margin requirement
This is calculated on the basis of the following data: total open positions, historical volatilities, daily mark-to-market. The RIVA margin is estimated between at persentage of the total outstanding position per clearing account, depending on the type of products and the volatilities.
This should be held in a pledged account at all times.
The exact calculation of the daily margin requirement will be made through the RIVA (RIsk VAluation) model, based on the estimation of the worst possible change in the value of an open position due to price volatility of the underlying asset over a specified time period which is assumed to elapse before ADECH is able to close the position in the market. Accordingly, there are two major parameters for the RIVA calculation:
The lead time, which is defined as the elapsed time between the moment of default declaration and the moment that ADECH closes the defaulting member's positions in the market, and
The historical volatility of the underlying price, scaled to the length of the above specified lead time.
Also, the RIVA model uses a number of built-in risk parameters, which enhance its ability to measure risks accurately and allow a wide range of analyses for risk management purposes:
RIVA uses certain pricing models for different types of products: futures, stock-lending, stock-borrowing, options (Black-Scholes, binomial).
It allows for correlation effects between homogeneous products and netting of contracts within the same underlying series.
It offers the possibility for sensitivity analysis through user-defined stress test scenarios.
