Transcription of Does a Central Clearing Counterparty Reduce …
{{id}} {{{paragraph}}}
Example: bankruptcy
Does a Central Clearing Counterparty Reduce …
Doesa Central Clearing CounterpartyReduce Counterparty Risk?Darrell Duffie and Haoxiang ZhuGraduate School of Business, Stanford UniversityWe show whether Central Clearing of a particular class of derivatives lowers counterpartyrisk. For plausible cases, adding a Central Clearing Counterparty (CCP) for a class of deriva-tives such as credit default swaps reduces netting efficiency, leading to an increase in av-erage exposure to Counterparty default. Further, Clearing different classes of derivatives inseparate CCPs always increases Counterparty exposures relative to Clearing the combinedset of derivatives in a single CCP. We provide theory as well as illustrative numerical ex-amples of these results that are calibrated to notional derivatives position data for majorbanks. (JELG01, G14, G18, G28) key element of the new regulatory approach to financial stability is the cen-tral Clearing of derivatives. A Central Clearing Counterparty (CCP) stands be-tween over-the-counter (OTC) derivatives counterparties, insulating them fromeach other s default.
Does a Central Clearing Counterparty Reduce Counterparty Risk? other derivatives classes, results in a 37% reduction in pre-collateral expected
Loading..
Tags:
Information
Domain:
Source:
Link to this page:
Please notify us if you found a problem with this document:
Related search queries
Minimum Capital Requirements, Bank, Credit risk, Approaches, Risk, Down versus Bottom-Up Approaches in Risk, Capital Requirements Directive IV Framework, Capital Requirements Directive IV Framework Unfunded Credit Risk, Credit, A Simplified Method for Calculating the Credit, A Simplified Method for Calculating the Credit Risk, Basel Committee on Banking Supervision, Basel Committee on Banking Supervision Consultative, Credit Risk Modeling and Examination Techniques, Loss Distribution Approach in