Technical paper/CCP
How concentrated is the clearing ecosystem and how has it changed since 2007?
This paper uncovers changes to concentration of the clearing ecosystem and how it has changed since the 2007-9 financial crisis.
Central clearing and trade cancellation: the case of London Metal Exchange nickel contracts on March 8, 2022
This paper explores the 2022 nickel price event on the London Metal Exchange, examining LME’s response to the market stress, court verdicts and the potential impact on CCP rule books.
The fundamental role of the repo market and central clearing
The authors evaluate different economic functions of repo contracts and offer a summary of the structure of government bond repo markets in core advanced economies.
Correlation breakdowns, spread positions and central counterparty margin models
The authors investigate correlation behavior during adverse market conditions and the potential impact on CCP margins, finding that such breakdowns appear to be more common than expected.
Alternative margin models for mortgage-backed securities
The authors investigate mortgage-backed securities, applying margin frameworks often used on other asset classes to MBSs which could be uses as a supplemental model framework.
Better anti-procyclicality? From a critical assessment of anti-procyclicality tools to regulatory recommendations
The authors carry out quantitative and qualitative analysis of anti-procyclicality tools and suggest policy measures intended to make APC tools more effective.
On the recovery tools of a central counterparty
The author argues that assessments should be preferred over variation margin gains haircutting when CCP resilience is tested by cases of default loss being greater than prefunded financial resources.
Construction of hypothetical scenarios for central counterparty stress tests using vine copulas
Using the vine copula, the authors put forward a nonparametric means to generate and/or validate hypothetical stress scenarios.
Mitigating margin procyclicality: the effectiveness of anti-procyclicality measures during the Covid-19 stress event
This paper analyzes the effectiveness of APC measures implemented by central counterparties for clearing member and client margins, with effectiveness sensitive to the details of calibration and type of portfolios to which the measure is applied.
“Closing the gaps: moving forward on tail risks in central clearing”: a central bank of issue perspective
The authors explain the priorities for CCP recovery and resolution from a central bank of issue perspective, focussing on structural barriers and how gaps could be overcome.
Choice of margin period of risk and netting for computing margins in central counterparty clearinghouses: a Monte Carlo investigation
The authors provide a quantitative comparison for evaluating the impact of collecting margins in a gross-versus-net system with the margin period of risk (MPOR) set to between one and five days.
Procyclicality of central counterparty margin models: systemic problems need systemic approaches
In this paper the author argues that the focus on initial margin models is misplaced, and the reasons for this are illustrated by empirically testing the performance of standard initial margin models during the March 2020 events.
Procyclicality control in risk-based margin models
This paper revisits the procyclicality issue in risk-based margin models and provides additional insight on procyclicality mitigation techniques.
Clearing away after Brexit?
This paper analyzes, from a legal perspective, the new framework, the roles and responsibilities of the European Central Bank, ESMA and the European Commission, and the possible outcomes for UK CCPs once Brexit is complete.
A descriptive analysis of the client clearing network in the European derivatives landscape
The authors present the findings of a detailed descriptive analysis of client clearing activity for derivatives in the euro area, as well as that of clearing members more broadly.
Brazil’s BM&F in 1999: a central counterparty near-failure case?
The authors argue that, despite some concerns on systemic risk expressed by high-level Banco Central do Brasil officers, the (potential) defaults of Marka and FonteCindam would not have been sufficient to lead BM&F to a failure.
Toward reducing the operational risk of emerging technologies adoption in central counterparties through end-to-end testing
This paper discusses the software-testing challenges of traditional central counterparties as well as the risks, biases and problems related to new technologies. It also outlines a set of requirements for an end-to-end validation and verification…
Concentration in cleared derivatives: the case for broadening access to direct central counterparty clearing
In this paper, the authors explore the benefits and challenges of encouraging major end-users of derivatives to become direct clearing members of central counterparties (CCPs).
Too much, too young: improving the client clearing mandate
We present new evidence of the distribution of risk in client portfolios and use this to motivate clearing policy improvements.
Hypothetical yield curve scenarios for credit stress testing
In this paper, we discuss a set of hypothetical yield curve shift scenarios generated by applying extreme value distributions and a shaping procedure. These statistically derived hypothetical stress scenarios could be susceptible to model risk, leading…
CCP discounting big bang: convexity adjustment
The collateral transition to SOFR will create convexity adjustments that need to be modelled