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Credit Default SwapClearing Fund

Clearing Fund for CDS

In respect of each Clearing Participant, a Required CDS Clearing Fund Amount shall be calculated every business day as the larger of (1)CDS Clearing Fund Base Amount and (2)Expected Stressed Loss Share. (If such amount is less than 100 million yen, then the minimum clearing fund requirement shall be 100 million yen.)(*1)
(*1) The total required Clearing Fund for CDS amount contributed by all Clearing Participants was JPY46.3B (as of 30, June, 2020)

(1) CDS Clearing Fund Base Amount
CDS Clearing Fund Base Amount shall be the minimum amount covering 99% confidence level of [Initial Margin Base Amount + Variation Margin Base Amount] during past 6 months.
(2) Expected Stressed Loss Share
The portion of the amount of loss (risk equivalent under stressed conditions) that may arise under extreme but plausible market conditions (stressed condition) exceeding the amount of Initial Margin (excess risk amount) is calculated with respect to the positions of each CDS Clearing Participant. The Expected Stressed Loss Share shall be the amount equivalent to the expected loss arising at the time of simultaneous default of two CDS Clearing Participants (including their Affiliated Companies(*2)) whose excess risk amounts are the largest and the second largest, prorated according to the Required Initial Margin Amount of each CDS Clearing Participant. The total excess risk amount shall be the average of the sum total of daily excess risk amount for past 1 month.

(*2) Any subsidiary or affiliate, or the parent company of such Clearing Participant, or any subsidiary or affiliate of the parent company.

Stress Scenarios to be Used for Calculation

Stress scenarios are determined by JSCC taking into consideration stress with double the regular holding period (10 days) for the largest historical fluctuation involving default of reference entity. Expected amount of losses that may arise on the part of each Clearing Participant will be calculated with respect to these stress scenarios (the risk equivalent under stressed conditions).