Contact us
Share on LinkedIn

What's New in ISDA SIMM Version 2.7+2412.1?

ISDA has released SIMM version 2.7+2412.1—the latest update to its model for calculating initial margin on non-cleared derivatives. This release mainly features updated calibration using the latest data through December 2024, with minor refinements to risk factors.

New Version Naming Explained

  • 2.7: The model's methodology version.
  • +2412: Indicates calibration uses market data up to December 2024.
  • .1: Denotes it's the first draft or iteration of this calibration.

    • This enhanced naming convention brings greater transparency and makes it much easier to track both methodology changes and calibration updates.

    Bottom line: ISDA SIMM 2.7+2412.1 is a routine calibration update under the new, clearer versioning scheme, making it easier for market participants to stay current with the latest risk models.

    ISDA SIMM v2.7+2412.1 vs v2.7: What's Changed?

    Developed by Cumulus9, this tool highlights the impact of SIMM parameter changes. Use the dropdown menu to explore the impact across various risk factors, and interact with the charts and buttons to further analyze the results.

    Interest rate risk factors remain broadly unchanged, with minor shifts across delta risk weights and some tenors. Correlations across tenors generally decrease (by about 3–6%), especially at the short end, suggesting slightly higher margins due to reduced diversification, while delta concentration thresholds have risen for regular volatility exposures.
    • The inflation risk weight rate remains unchanged to 52
    • The cross-currency basis swap spread risk weight is updated to 22 from 21
    • The vega risk weight is updated to 0.21 from 0.2
    • The historical volatility ratio is updated to 0.75 from 0.69
    Correlation within the same currency between different tenors
    2w1m3m6m1y2y3y5y10y15y20y
    2w
    -0.01
    -0.03
    -0.05
    -0.04
    -0.05
    -0.04
    -0.03
    -0.02
    0
    0
    1m
    -0.01
    -0.01
    -0.02
    -0.03
    -0.03
    -0.01
    0
    +0.01
    +0.01
    +0.02
    3m
    -0.03
    -0.01
    +0.01
    +0.01
    0
    +0.01
    +0.01
    +0.03
    +0.04
    +0.03
    6m
    -0.05
    -0.02
    +0.01
    0
    0
    +0.01
    +0.02
    +0.04
    +0.05
    +0.04
    1y
    -0.04
    -0.03
    +0.01
    0
    0
    +0.02
    +0.03
    +0.06
    +0.07
    +0.06
    2y
    -0.05
    -0.03
    0
    0
    0
    +0.01
    +0.02
    +0.05
    +0.06
    +0.06
    3y
    -0.04
    -0.01
    +0.01
    +0.01
    +0.02
    +0.01
    0
    +0.04
    +0.06
    +0.04
    5y
    -0.03
    0
    +0.01
    +0.02
    +0.03
    +0.02
    0
    +0.02
    +0.03
    +0.02
    10y
    -0.02
    +0.01
    +0.03
    +0.04
    +0.06
    +0.05
    +0.04
    +0.02
    +0.01
    +0.01
    15y
    0
    +0.01
    +0.04
    +0.05
    +0.07
    +0.06
    +0.06
    +0.03
    +0.01
    +0.01
    20y
    0
    +0.02
    +0.03
    +0.04
    +0.06
    +0.06
    +0.04
    +0.02
    +0.01
    +0.01
    • Between any two sub-curves is updated to 0.983 from 0.99
    • Between the inflation rate and any yield is updated to 0.37 from 0.26
    • Between the cross-currency basis swap spread and any yield or inflation rate remains unchanged to -0.05
    • Between different currencies is updated to 0.34 from 0.3
    Tenorv2.7+2412.1v2.7Change
    High volatility51m29m+22m
    Regular volatility (well-traded)210m340m-130m
    Regular volatility (less-traded)100m61m+39m
    Low volatility230m150m+80m

    Conclusion

    The updates introduced in ISDA SIMM version 2.7+2412.1 reflect ongoing calibration to recent market dynamics, bringing incremental yet potentially impactful changes to margin requirements across asset classes. Keeping abreast of these developments is essential for effective risk management and regulatory compliance in an ever-evolving environment. Participants should evaluate the effects on their portfolios and adapt their hedging and capital strategies as needed.

    As a licensed ISDA SIMM vendor, Cumulus9 is here to support you with advanced risk analytics and tailored insights into the latest SIMM methodology and calibration updates. Our expertise ensures you have the tools and information necessary to respond proactively to margin changes. Contact us to discover how our solutions can help you optimize risk management in today's shifting market landscape.

    Get in touch to find out more about Cumulus9.