Bank names obstruct single-name CDS clearing

Ice is “working through” wrong-way risk issues, may need to revamp auctions

Volatility arrows2
Wrong-way risk: "The biggest concern on clearing financials," says a credit trader at a NY hedge fund

The dangers of clearing single-name credit default swaps (CDSs) on bank members of a central counterparty (CCP) are impeding efforts to voluntarily clear the product – a bid by the industry to bolster dwindling liquidity – and it could obstruct mandatory clearing of the product, credit traders warn.

One of the threats is that a clearing member might inherit contracts written on itself in the event of a peer bank collapsing, either through the auction process following a clearing member default o

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an indvidual account here: