ISDA: Constant Exposure Method Out-Of-Date

13 Jun 2011

The constant exposure method (CEM) currently used by clearinghouses to estimate capital charges for cleared derivatives will not work in the new, cleared over-the-counter derivatives market, the International Swaps and Derivatives Association says in a note published today.

The constant exposure method (CEM) currently used by clearinghouses to estimate capital charges for cleared derivatives will not work in the new, cleared over-the-counter derivatives market, the International Swaps and Derivatives Association says in a note published today. The method overestimates the amount of capital needed for large ...

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