Core SGF and standardised stress testing for credit risk for commodity derivatives

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....on for National Commodity Derivatives  Exchanges 2. Vide circular SEBI/HO/CDMRD/DRMP/ClR/P,2018/52 dated March 21, 2018 SEBI had inter-alia prescribed that post transfer of clearing and settlement  functions from commodity derivatives exchanges to Clearing Corporations, Clearing Corporations shall be required comply with the risk management norms prescribed by SEBI for commodity derivatives exchanges. 3. Vide circular CIR/MRD/DRMNP/25/2014 dated August 27, 2014 SEBI had issued norms related to Core Settlement Guarantee Fund, default waterfall,  stress testing, back testing etc. for recognised Clearing Corporations and Stock Exchanges. 4. It has been decided that Clearing Corporations clearing commodity derivatives tr....

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.... Commodity Derivatives Market Regulation Department Email:[email protected]   Annexure Standardised Stress Testing for commodity derivatives Part A. Scenarios Historical Scenarios 1 Peak Historical Return Price movement in respect of each underlying over the MPOR period during the  last 15 years to be considered: Scenario IA: Maximum percentage rise over MPOR period Scenario 1B: Maximum percentage fall over MPOR period 2 Peak historical price volatility Historical price volatility (EWMA volatility) in respect of each commodity during the previous 15 years is to be considered. Percentage price movement equal to 3.5  times the peak historical volatility adjusted for applicable MPOR ....

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.... Scenario 5A: Underlying price increasing by 1.5 PSR adjusted for MPOR period.  volatility increasing by 1.5 VSR. Scenario 5B: Underlying price decreasing by 1.5 PSR adjusted for MPOR period, volatility increasing by 1.5 VSR. Exchanges shall carry out stress tests using each of the scenarios given in Part A as follows - a. By stressing positions in all commodities simultaneously b. By first identifying top 10 commodities based on OI and stressing 1  commodity at a time (ignoring positions in other commodities and the corresponding margins) Part B. Methodology The percentage price movements identified in each of the above scenarios shall be applied to the commodity price on the day for which the stress test is be....