Standard Initial

Margin Model
SARTHAK GUPTA
SAP ID: 80101190269
NMIMS, Mumbai
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Equity Swap Bundle:

Delta Margin:-

First, calculate the value ok K for all the three sector for which we need to
calculate the Concentration Risk and Weight Sensitivity.

Concentration Risk =

Where, Sk = sensitivity of the delta margin which is equal to the

given equity delta
Tb = concentration threshold for the bucket b
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Tb will be 26 for Technology and Utility Sector and 540 for Stock
Index

CR for technology = 1
CR for utility =1
CR for stock index = 1
The calculation for the same has been provided in the excel sheet attached.

Next, calculate Weight sensitivity

Weight sensitivity = RWk → risk weight

Sk → sensitivity
CRk →concentration risk

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.

WSk for technology = 240000

WSk for utility = 1050000
WSk for stock index = 510000
The calculation for the same has been provided in the excel sheet attached.

Aggregated Weighted sensitivities is:-

Technology sector’s Equity delta is given as a whole, therefore, we ignore the

correlation parameter

K for technology = 57600000000

K for utility = 1.1025E+12
K for stock index = 2.601E+11

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Adding these three figures, we will get the first submission of K which is the first part of
the delta margin formula.
Now we will calculate the second part which is calculating correlation parameters
applicable to each risk class.

WSk is the submission of K value of technology, utility and stock index, which is greater
than the individual value of Kb which is for a single sector, therefore ultimately S b will be
equal to Kb.

Value for all the sectors are calculated, two sectors are taken at a time by multiplying
the k values with correlation parameters.
Correlation parameter for Technology and Utility = 26%
Correlation parameter for Technology and Stock Index = 39%
Correlation parameter for Utility and Stock Index = 32%
Calculation provided in excel sheet attached.
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Now, adding the submission of K with the submission of values
calculated in the previous slide, we get the value of delta
margin.

DeltaMargin = 1305686.027

Calculated in Excel file

Initial margin = DeltaMargin + VegaMargin + CurvatureMargin + BaseCorrMargin

Required Data is unavailable for VegaMargin and CurvatureMargin

BaseCorrMargin is calculated only for Credit(Qualifying) risk.
Therefore,

InitialMargin = 1305686.027

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