CCPs should pay twice into default waterfall, say researchers
Chicago Fed paper calls for contributions in two phases: before members’ capital is tapped and after it is depleted
Central counterparties (CCPs) should contribute twice to the cost of covering a member default, argue researchers at the Federal Reserve Bank of Chicago.
Financial markets analyst Rebecca Lewis and senior policy adviser John McPartland compared the order of payments in the event of default – the ‘default waterfall’ – at 17 major CCPs in the UK, EU and US in a paper due to be published in the Journal of Financial Market Infrastructures later this year. They conclude that CCPs should contribute
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Markets
QIS 3.0 ‘bonanza’: hedge funds pivot from options to swaps
Pod-level scramble for max-loss exposure gives way to central risk books seeking overlays
Shaking things up: geopolitics and the euro credit risk measure
Gravitational model offers novel way of assessing national and regional risks in new world order
Eurex squashes butterflies with Stir incentives
Rebate caps on low-risk strategies flatten mid-curve bulge in €STR contracts
The relativity of the fractional Gamma Clock
Bank of America quant expands his Gamma Clock model with a fractional Brownian motion
Volatility selling is down, but not out
Shrinking risk premiums could end cycle of vol suppression, traders say – but not just yet
Futures gain ground in G10 FX pricing
Some market-makers believe contracts are now primary market price for Commonwealth currencies
AI ‘lab’ or no, banks triangulate towards a common approach
Survey shows split between firms with and without centralised R&D. In practice, many pursue hybrid path
Everything, everywhere: 15 AI use cases in play, all at once
Research is top AI use case, best execution bottom; no use is universal, and none shunned, says survey
