We decompose your index trades
IM Risk Generator has the capability to decompose index-based trades allowing them to be represented as sensitivities to the underlying components rather than the index itself. Using decomposition typically reduces the costs of margin because the decomposed representation carries a lower risk weight. On top of this the potential natural hedging between underlying components and the rest of the portfolio can create additional savings.
Reduction in SIMM with no additional effort
Changing to the decomposition method is simple and straightforward requiring no change in data submission. As we have access to dozens of common indexes a firm simply needs to confirm which indexes they would like decomposed and we can enable the functionality.
Decomposition has been shown to be able to reduce SIMM exposure by between 30 and 50%. The actual reduction will depend on specifics of the portfolio.
We can provide a calculation of the potential benefit so that firms can estimate an accurate ROI of making the change.
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