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.
LCH sets €STR swap clearing launch date
Clearing house to offer the swaps from October 21, discounted at Eonia
Clearing house of the year: JSCC
Asia Risk Awards 2019
Eurex to launch cross-currency swap clearing ‘within weeks’
Clearing service will target dealer-to-dealer trades before later rolling out to clients
SOFR discounting switch splits Goldman and JP Morgan
CFTC committee calls on clearing houses to align timing and compensation mechanisms
Brexit flips LCH-Eurex basis
LCH-Eurex basis has inverted on buy-side flows, hitting –1.3bp at July low
An old fight over margin protections rears its head
CFTC rules on margin and loss limits for separate accounts are being torn up for asset managers
Virtue bonds, Hong Kong FRTB and letting go of Lehman
The week on Risk.net, August 24–30, 2019
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