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 copy this content. Please contact [email protected] to find out more.

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 individual account here: