Masters Degrees (Statistics and Actuarial Science)
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Browsing Masters Degrees (Statistics and Actuarial Science) by Author "Cronje, Robert"
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- ItemThe appropriateness of ISDA SIMM for delta risk initial margin calculations in the South African over-the-counter interest rate swap market(Stellenbosch : Stellenbosch University, 2020-12) Cronje, Robert; Van der Merwe, Carel Johannes; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Statistics and Actuarial Science.ENGLISH SUMMARY : This research assignment assesses the appropriateness of the calibrations in the ISDA SIMM for calculating delta risk initial margin (IM) in the current over-the-counter interest rate swap market in South Africa. Three main experiments are conducted that include novel ways of delineating and uncovering potential risks in the ISDA SIMM. By comparing the delta risk IM obtained using the standard model and that of a filtered historical simulation expected shortfall model that is calibrated to the South African swaps index curve, the IM appropriateness can be inspected for various profiles based on their relative sensitivities to the tenors of the swap curve. The experiments show that the ISDA SIMM is appropriate in most cases, but due to its broad calibrations, some shortfalls are shown to exist. The results are standardised throughout and are independent of absolute size, as liquidity and concentration features are deliberately excluded. This makes the results more generally applicable and also makes all the results obtained in the analyses comparable. The framework developed here can be replicated by practitioners using their own systems in order to obtain results that meet their internal calibrations as well as their specific risk and return requirements.