Does Central Clearing Reduce Counterparty Risk in Realistic Financial Networks

@inproceedings{Garratt2015DoesCC,
  title={Does Central Clearing Reduce Counterparty Risk in Realistic Financial Networks},
  author={Rodney Garratt and Peter Zimmerman},
  year={2015}
}
  • Rodney Garratt, Peter Zimmerman
  • Published 2015
  • Economics
  • Novating a single asset class to a central counterparty (CCP) in an over-the-counter derivatives trading network impacts both the mean and variance of total net exposures between counterparties. When a small number of dealers trade in a relatively large number of asset classes, central clearing increases the mean and variance of net exposures, which may lead to increased counterparty risk and higher margin needs. There are intermediate cases where there is a trade-off: The introduction of a CCP… CONTINUE READING

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