PCA-based portfolio margining

A system for determining a margin requirement for a financial product portfolio, wherein market conditions for the financial product portfolio are characterized by a zero curve, the system comprising a processor and a memory coupled with the processor, the system further comprising:

• a market data module to obtain historical return data;
• first logic stored in the memory and executable by the processor to generate a principal component analysis (PCA) model of the zero curve based on the historical return data, the PCA model comprising a plurality of PCA factors;
• second logic stored in the memory and executable by the processor to produce a plurality of scenario curves, each scenario curve reflecting the PCA model of the zero curve with a respective one of the plurality of PCA factors offset from a corresponding base value for the zero curve;
• third logic stored in the memory and executable by the processor to calculate a respective projected value of the financial product portfolio for each scenario curve of the plurality of scenario curves;
• fourth logic stored in the memory and executable by the processor to calculate a loss risk amount for each PCA factor based on the respective projected value and a current value of the financial product portfolio;
• and
• fifth logic stored in the memory and executable by the processor to determine the margin requirement based on a sum of the loss risk amounts for the plurality of PCA factors.

A system for determining a margin requirement for a financial product portfolio, wherein market conditions for the financial product portfolio are characterized by a zero curve, the system comprising:

• means for producing a plurality of scenario curves, each scenario curve reflecting a principal component analysis (PCA) model of the zero curve with a respective PCA factor of a plurality of PCA factors of the PCA model offset from a corresponding base value for the zero curve;
• means for calculating a respective projected value of the financial product portfolio for each scenario curve of the plurality of scenario curves;
• means for calculating a loss risk amount for each PCA factor based on the respective projected value and a current value of the financial product portfolio;
• and
• means for determining the margin requirement based on a sum of the loss risk amounts for the plurality of PCA factors.