In this paper, the authors answer three questions about the appropriate allocation of nondefault losses at central counterparties.
Estimating “hedge and auction” liquidation costs in central counterparties: a closeout risk approach
This paper shows how the closeout risk framework can be extended to realistically represent and simulate the potential outcomes of “hedge and auction” default management policies currently implemented by several major central counterparties.
Trump order is a chance to ease some rules and promote cross-border regulatory deference
Scarcity of high-quality liquid assets gives rise to liquidity risk worries, say banks
Regulator says it needs more time to consider market impact of CCLF proposal
Concern over structural deficiencies as SOFR chosen to replace key benchmark
CME, Ice and LCH treat variation margin as settlement; Eurex awaits further guidance
Money funds cleared over $10 billion of US Treasury repo trades at FICC in June and July
Guidance tips balance in debate over interest payments in settled-to-market swaps
CCPs with EU bank licences currently run leverage ratios of less than half the minimum
Three factors slashed size of book by 25%, including move to treat margin as settlement
Stability, oversight, Parisian ambition, repo haircuts: LCH is under attack from all sides
Questions about post-Brexit status of UK CCP could spark mass migration – and severe volatility
Quants propose technique to generate effective, plausible CCP stress-testing scenarios
Two CCPs report interest from LCH customers; banks expect first book transfers in early 2018
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Dodd-Frank leaves legal uncertainty, but proposed alternatives could be even worse
Capital framework hurts clearing resilience, Citi execs argue
This paper is meant to serve as a comparison of the approaches and margin models employed by CCPs.
This paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
This paper presents a new approach to parameter selection based on the statistical properties of the worst loss over a margin period of risk estimated by the margin model under scrutiny.
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
In this paper, the authors address one aspect of CCP risk management: initial margining practices. The paper provides a historical review of margining at selected CCPs as well as an overview of their current margin policies.
New FSB analysis reveals interdependencies of clearing system