Technical paper/CCP
Managing market liquidity risk in central counterparties
This paper discusses the different approaches to incorporating market liquidity risk within a CCP’s default waterfall and the challenges that these approaches pose.
Initial margin model sensitivity analysis and volatility estimation
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.
Performance testing of margin models using time series similarity
This paper proposes a performance test based on empirical similarity that would account for margin shortfall, procyclicality and efficiency in a single score.
Cleared margin setting at selected central counterparties
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.
A sound modelling and backtesting framework for forecasting initial margin requirements
Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM
A network model for central counterparty liquidity risk stress testing under incomplete information
The authors put forth a realistic network model that maximizes the use of data available to a CCP in order to simulate credit default contagion.
The recent crises and central counterparty risk practices in the light of procyclicality: empirical evidence
This paper focuses on the risk practices of Central Counterparties in the light of their potentially procyclical features.
Systemic risks in CCP networks
Barker, Dickinson, Lipton and Virmani propose a credit and liquidity risk model for CCPs
I want security: stylized facts about central counterparty collateral and its systemic context
In this paper, the authors introduce the principal policy issues affecting CCPs and collateral and then use these disclosures to contextualize some stylized facts that may aid in understanding and addressing the policy issues.
MVA transfer pricing
Wujiang Lou extends liability-side pricing theory to initial margin
The challenges of derivatives central counterparty interoperability arrangements
This paper stuides a relevant policy question: does interoperability of cash equity CCPs also imply that it is beneficial to introduce interoperability for derivative CCPs?
Liability-side pricing of swaps
Wujiang Lou presents a framework to compute recursive CVA and FVA via Monte Carlo simulation
Central counterparties and banks: vive la difference
This paper highlight the key differences between CCPs and banks in terms of roles, risk profiles, balance sheets and systemic characteristics, and the implications of these differences for CCP risk management and regulation.
“Incomplete demutualization” and financial market infrastructure: central counterparty ownership and governance after the crisis of 2008–9
This paper examines risk management governance challenges of the demutualized CCP ownership model and the incentives faced by “incomplete demutualization”, where clearing members remain the ultimate underwriters of CCP default risk.
Skin in the game: central counterparty risk controls and incentives
The authors discuss the incentives created by the structure of CCPs’ default waterfalls, drawing out the role of transparency and governance in ensuring effective incentives.
Central counterparties need thicker skins
The paper makes an important contribution to this ongoing dialogue by proposing a set of principles and an analytical framework for calibrating skin-in-the-game contributions.
Central counterparties in crisis: International Commodities Clearing House, New Zealand Futures and Options Exchange and the Stephen Francis Affair
This paper highlights the vulnerability of CCPs to large concentrated positions that may be difficult or impossible to close out.
Central counterparties in crisis: the Hong Kong Futures Exchange in the crash of 1987
This Forum contribution shows the reader the lessons that can be learned from one of the few occasions in history when a CCP got into severe difficulty.
Central counterparties: addressing their too-important-to-fail nature
This paper argues that the current international policy measures with respect to central counterparties (CCPs) only partly address the systemic risk posed by CCPs.
Analysis of risk factors in the Korean repo market based on US and European repo market experiences during the global financial crisis
This paper evaluates the Korean repo market in the light of the global financial crisis.
Cave quid optes: waterfalls and central counterparty capital
This paper explores the lines of defense of a central counterparty. The author examines the lines of defence ("the waterfall") of a central counterparty (CCP) inter alia in the context of the requirements set by the Principles for Financial Market…
MVA by replication and regression
Burgard and Kjaer method is extended to include margin valuation adjustment