Taipei, Taiwan: Ares International Corp. was recently certified by International Swaps and Derivatives Association (ISDA) to offer commercial services based on Standard Initial Margin Model (SIMM). This ISDA SIMM™ solution will assist financial institutions to easily standardize the calculation of initial margin fit for regulator’s requests.
Frank Lin, the president of Ares, said that according to the announcements of Basel Committee on Banking Supervision (BCBS) and International Organization of Securities Commissions (IOSCO), financial intuitions should phase the calculation of initial margin with Aggregate Average Notional Amounts (AANA). Ares was proud to be the first Taiwan-based licensed vendor by ISDA SIMM™ to offer related commercial services. With the help of ISDA SIMM™ solutions, expectedly, the best investment decision can be made by bank traders and risk managers, the cost of initial margin be decreased, the operation profits be enhanced, and the risk of non-settled positions be reduced.
Zheng-Hui, Chen, the manager of Ares R&D department, mentioned that after global financial crisis of 2008, BCBS and IOSCO started supervision plans of OTC (over the counter) derivatives transactions. One of the important measures is for the above transaction to charge essentially related initial margin and offer a consistent standard calculation of it. This model has taken Delta Risk, Vega Risk, Curvature Risk, Inter-curve Basis and Concentration Risk into consideration, which emphasize class of asset, values of sensitivity, and categories of risk plus correlation between various rick factors. This measure can strengthen the advantages of safe-haven transaction and asset variety under the same class of asset with different risk factors.
To define a clearly standard calculation of initial margin as the final form for the future of data exchange, ISDA proposes that transaction data must follow Common Risk Interchange Format (SIMM™ CRIF). As a ISDA SIMM™ officially-licensed provider, Ares can provide consulting services conforming with CRIF standard to help clients organize and convert transaction data to fit CRIF regulations. Plus, with self-developed Ares Cross Pricing System, the features of this initial margin solution will be more comprehensive.
