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Capital Markets Glossary

A short explanation of commonly used terms, used in these courses


A scenario is a set of data which represents market conditions at a point in time. For instance a scenario could show the FX rates, Interest Rates, Curve Points and Equity prices on a specific date. A sequence of scenarios can be used to simulate a portfolio.


The Schedule is one approach to calculating IM. The Schedule itself is specified within the regulations and states the percent of notional required for IM for each asset class. This approach is simpler to implement but is far more expensive in how much IM it will require as the Schedule isn't based on the risk of trades. The Schedule also doesn't recognise the net risk from offsetting trades. Firms should only adopt this method if no other option can be achieved.


The Standard Initial Margin Model is a method to calculate IM to meet the uncleared margin regulations. The SIMM is a sensitivity based approach.


Simulating a portfolio means applying theoretical market scenarios to determine how the portfolio would behave (profit or loss) under those circumstances. A sequence of simulations can be analysed to build a distribution of profits and losses as part of a Value At Risk calculation.


Society for Worldwide Interbank Financial Telecommunication ( A global secure computer-to-computer messaging service for the capital markets.

Systemic risk

The concept of the overall stability of the world financial system. The way in which banks, clearing houses, buy-side firms and regular humans are interconnected became sadly apparent in 2008 in the crisis. New regulations are intended to reduce system risk.