CCP
WHAT IS THIS? A central counterparty (CCP) manages default risk by collecting initial and variation margin from both parties to a trade. Spill-over losses are absorbed via a default fund to which all members contribute – introducing a degree of mutualised risk – and by the CCP’s own capital. The concept is an old one that was extended to over-the-counter derivatives in the aftermath of the financial crisis.
Default auctions, Libor replacement and op risk capital
The week on Risk.net, August 10-16, 2019
CME-LCH basis collapses amid rates downturn
Brexit and recent LCH initial margin raise could also be factors
Clients demand access to CCP default auctions
“In a default, we are comfortable taking on risk and can move quickly,” says DRW’s Wilson
The great migration: CCPs ponder life after Span
As CME moves to a value-at-risk methodology, CCPs that license its model look on nervously
Funding and credit risk with locally elliptical portfolio processes: an application to central counterparties
In this paper, the authors extend the scaling approach of Andersen et al (2017a) from a model driven by Brownian motion to one driven by an arbitrary isotropic Lévy process.
SGX’s Koh defends clearing methods post-Nasdaq
Existing tools still work, despite external scrutiny on default management, says risk chief
FSB’s Domanski cool on bail-in debt for clearing houses
Global standard-setter says all clearing participants must be incentivised to manage risk
Swaptions face valuation hit on discounting switch
Move to new reference rates could hurt some swaptions holders, while others enjoy “windfall gain”
Swaps counterparties spooked by Emir position pairing
Stumble on voluntary position reporting could undermine push to reform ETD regime
CCP margin buffers too big, research suggests
Procyclicality calculations should depend on expected spikes in volatility, argue Ice risk experts
Central counterparty anti-procyclicality tools: a closer assessment
This paper investigates whether the substantial focus placed on the procyclicality of initial margin reflects both the original concerns at the time of the 2007-8 financial crisis and the intrinsic 'modus operandi' of CCPs.
At Ice Clear US, largest margin breach on record
The clearing house last reported a margin shortfall in Q2 2017
Ice, CME set to launch new VAR models in early 2020
Bourses plan to switch margining of energy futures at different times, prompting speculation of “arbitrage opportunities”
Podcast: Gregory and Chung on wrong-way risk modelling
Quants discuss a better way to model wrong-way risk
US parries EU jab on CCP oversight
CFTC’s Pan questions Esma’s “very complex” test; EC’s Pearson calls it “more intelligent” than US’s
LCH, Eurex create fix for floating repo’s Eonia problem
Clearing houses to adjust repo balances the following day once rate moves to T+1
Eurex made €525m VM call in Q1
Margin call equivalent to 2% of CCP’s own liquidity resources
Eurex boosts liquidity buffers by 8%
Central bank deposits continue to make up bulk of CCP's liquidity resources
Capitalab completes first compression run with SGX
Compression efficiency in SGX Nikkei 225 options could be as high as 50%, Capitalab says
HKEX boosts member credit risk monitoring
Hong Kong exchange’s several hundred clearing members pose complex default risk correlations, says chief risk officer
Libor leaders: LCH brings SOFR swaps into the fold
CCP adapted risk models to start clearing new swaps and plans quick switchover to SOFR discounting
Libor leaders: how seven firms are tackling the transition
BMO, Prudential, Associated British Ports, LCH and others reveal their plans to move off troubled benchmark
Libor leaders: BMO sets the pace in RFR transition
Early mover switches £10 billion of pension liability swap hedges to Sonia
Default fund costs dominate US G-Sibs’ cleared swaps charges
Default fund contributions accounted for 62% of the eight banks’ RWAs