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Market Insight - Margin Replication: A Necessity in the New Derivatives Regime - December 2013

The year 2013 has seen mandatory central clearing of many major derivatives become reality.  In today’s new derivatives regime, counterparty credit risk is mitigated through margining, but at the cost of greater liquidity risk.  A new capability, then, is to replicate and analyze margin requirements, thus enabling monitoring of current and potential liquidity demands.  This Market Insight is a re-print adapted from two recent Op-Ed articles on “Market Replication” published in Pensions & Investments and Portfolio Institutional.