Notice

ASX Clear – Credit Stress Test (CST) methodology

What's this about:
  • ASX Market
  • Clearing
  • Operations
  • Risk
  • Equities
  • Exchange Traded Products (ETP) & mFund
  • Options & ETOs
  • Flexclear OTC
Notice reference number: 0954.24.08
Date published: 21/08/24
Effective as of: 02/09/24
Last updated: 21/08/24

ASX is implementing the Volatility Skew component of the Phase 3 changes for the ASX Clear CST framework on 2 September 2024. This change is focused on enhancing stress testing coverage of out of the money (OTM) index and equity options, with the introduction of scaling factors to account for the effect of equity volatility skew. The following scaling factors will be applied to adjust existing volatility shocks for the moneyness and tenor of options:

Moneyness

1M

3M

6M

12M

90%

1.2x

1.2x

1.1x

1.1x

95%

1.1x

1.1x

1.0x

1.0x

100%

1.0x

1.0x

1.0x

1.0x

105%

1.0x

1.0x

1.0x

1.0x

110%

1.0x

1.0x

1.0x

1.0x
 

The scaling factors apply to all CST scenario types, i.e. historical, hypothetical and theoretical.

All Credit Stress Test scenarios applicable to cash market products are available in Appendix 1-Cash market scenarios and equity derivatives are available in Appendix 2-Equity option scenarios. The volatility shock scaling factors applicable to equity derivatives are provided in Appendix 3-Vol skew scaling factors.

 

What do I need to do by when?

The revised CST changes will be effective for open positions as at end of day Monday, 2 September 2024, for any AIMs settled on Tuesday, 3 September 2024.  

Need more information?

Issued by

Clearing Risk Oversight

Contact information

Email: CROversight@asx.com.au

Disclaimer