Does initial margin eliminate counterparty risk?
Andersen, Pykhtin and Sokol show the existence of residual exposure after initial margin posting
CLICK HERE TO DOWNLOAD THE PDF
It is widely believed that mandatory posting of initial margin should effectively eliminate counterparty risk from bilateral trading. Here, Leif Andersen, Michael Pykhtin and Alexander Sokol apply a new framework for collateralised exposure modelling that shows this is not necessarily true. The authors demonstrate that time lags in the credit support annex between trade payments and margin reposting can produce exposure spikes that substantially exceed VAR-based
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact [email protected] to find out more.
You are currently unable to copy this content. Please contact [email protected] to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email [email protected]
More on Risk management
Derivatives
Axes that matter: PCA with a difference
Differential PCA is introduced to reduce the dimension in derivative pricing problems
Receive this by email