Forward Margin are the main component of the clearing guarantee system for forward markets. They are contributed by CSH Members and their purpose is to secure the risk related to the transactions cleared by each Member. They are calculated daily after the end of the session for each member.
Forward Margin consist of two components: the Initial Margin and the Variation Margin. When calculating the required value of the Forward Margin, IRGiT considers the possible netting of the Initial Margin and the Variation Margin.
Detailed information on the methodology for calculating Forward Margin is described in the Detailed Clearing and Settlement Rules of the Clearing and Settlement House.
Initial Margin
The purpose of the Initial Margin is to cover the changes in prices in the period from the most recent replenishment of margin. It is calculated for netted positions in delivery during the period, on the basis of the following information:
- Position balance expressed in MWh,
- current clearing price,
- risk parameters
The required value of the Initial Margin is always equal or greater than 0.
Risk parameters for individual contract types cleared by IRGiT are calculated with the confidence level of at least 99%. The current and archival values of the risk parameters are available in the Parameters tab.
Variation Margin
Variation Margin is designed to mark the portfolio value to market on an ongoing basis. It is calculated on the basis of the following information:
- current clearing price,
- volume in buy transactions and average weighted buy prices,
- volume in sell transactions and average weighted sell prices.
Depending on the current market conditions and the prices at which a Member concluded transactions, a Variation Margin may be either positive (surplus) or negative (requirement).
Forward Margin Calculators
IRGiT allows Clearing House Members to estimate and forecast the amounts of forward margin required by IRGiT through the use of the IRGiT Margin Calculator.
Forward Margin calculator is available on the IRGiT website.