At Nord Pool we continually review our operational procedures and pricing to ensure our operations remain robust and secure for all customers, while maintaining good value for money and the high levels of service that our customers expect.
The aim of the Nord Pool Margin Model is to produce a collateral requirement that easily and realistically reflects the risk in a member’s trading behaviour. The model estimates a requirement that needs to be met by the member at all times, in line with Nord Pool’s Clearing Rules.
There are two margin components calculated daily, taking into account the clearing member’s trading behaviour. The first component is defined as a clearing member’s combined MAX net MWh position (Daily Net Position) multiplied by the risk parameter. This amount is then multiplied by the day factor set by Nord Pool. The Daily Net Position has a lookback period, currently set at 30 days. The second component is a clearing member’s MAX net financial position (Daily Settlement Position), times a multiplier set by Nord Pool. The Daily Settlement Position has a lookback period, currently set at 7 days. The two margin components are then added together and multiplied by a Credit Risk Adjustment (CRA) multiplier. You can read about the CRA methodology under Credit Risk Adjustment Methodology above.
Note that all parameters and the lookback periods for both the Daily Net Position and the Daily Settlement Position may change, as they are set based on prevailing market conditions.
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