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SEBI comes out with new stress testing perimeters for commodity derivatives
PrintMarkets regulator Sebi on December 21 issued new stress testing perimeters for commodity derivatives in order to tackle extreme volatile price events. The move comes after the regulator received representation to review the requirement of including all the price movements during the last 15 years, in the historical scenarios prescribed for stress testing.
With a view to address the concerns emanating from exceptional and extreme volatile price events, Sebi said price movements of the last 15 years will be scanned for stress testing.
"The margin period of risk will now be 15 years instead of 10 years. The same is an outcome of crude oil volatility and negative rates," he added. In September, the Securities and Exchange Board of India (Sebi) proposed an alternate risk management framework for commodities in case of near zero or negative prices.
"In recent times, extreme volatility has been observed in commodity prices globally, particularly in the case of crude oil, wherein the prices had unprecedentedly gone down to zero and subsequently, even negative." In such a scenario, margins equivalent to even 100 per cent of the futures price would not have been sufficient to cover the steep upward or downward price variations in the futures market, Sebi had said.
With a view to address the concerns emanating from exceptional and extreme volatile price events, Sebi said price movements of the last 15 years will be scanned for stress testing.
"The margin period of risk will now be 15 years instead of 10 years. The same is an outcome of crude oil volatility and negative rates," he added. In September, the Securities and Exchange Board of India (Sebi) proposed an alternate risk management framework for commodities in case of near zero or negative prices.
"In recent times, extreme volatility has been observed in commodity prices globally, particularly in the case of crude oil, wherein the prices had unprecedentedly gone down to zero and subsequently, even negative." In such a scenario, margins equivalent to even 100 per cent of the futures price would not have been sufficient to cover the steep upward or downward price variations in the futures market, Sebi had said.
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