Eurex Prisma, in the domain of financial derivatives and central counterparty clearing, represents Eurex Clearing AG’s sophisticated portfolio-based risk management system. Its principal function is to calculate margin requirements for cleared positions across various asset classes, including derivatives on equities, fixed income, and commodities, by aggregating and offsetting risks at a portfolio level. This system enhances capital efficiency for participants while maintaining robust risk coverage.
Mechanism
Eurex Prisma operates using a value-at-risk (VaR) methodology, which simulates potential losses under various market scenarios. It considers the correlations between different positions within a participant’s portfolio, allowing for significant margin reductions through risk netting. The system continuously monitors market data, position changes, and stress scenarios to dynamically adjust margin calls, ensuring that the collateral held adequately covers potential future exposure.
Methodology
The implementation of Eurex Prisma’s risk management methodology involves a comprehensive approach to portfolio margining. This includes defining risk parameters for each product, developing and validating complex simulation models for scenario analysis, and integrating these calculations into real-time clearing processes. Participants must understand the systemic benefits of portfolio margining, the data requirements for accurate risk calculation, and the operational procedures for managing margin calls to optimize their capital allocation and manage counterparty risk effectively.
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