Lower margin can fuel procyclicality in CCPs – research

Efforts to prevent ‘margin spiral’ during stress could encourage more risk-taking, paper argues

CCPs risk producing a margin spiral if they allow requirements to rise too fast during high volatility

Margin calls in times of crisis can make markets plunge further by increasing the stress on troubled banks – but relaxing rules to avoid this margin spiral could be just as bad, a new study claims. The findings serve as a warning to central counterparties and regulators in their efforts to tackle the problem of procyclicality in clearing.

As volatility rises in a stressed market, CCPs call for more margin from their members to cover the risk of losses, draining liquidity from the market and

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 info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options


Want to know what’s included in our free membership? Click here

This address will be used to create your account

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