Collateral Netting And Systemic Risk In The Otc Derivatives Market

Author : Mr.Manmohan Singh
Publisher : International Monetary Fund
Page : 17 pages
File Size : 44,9 Mb
Release : 2010-04-01
Category : Business & Economics
ISBN : 9781451982763

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Collateral, Netting and Systemic Risk in the OTC Derivatives Market by Mr.Manmohan Singh Pdf

To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.

Author : Mr.Manmohan Singh
Publisher : International Monetary Fund
Page : 24 pages
File Size : 45,7 Mb
Release : 2011-03-01
Category : Business & Economics
ISBN : 9781455228041

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Making OTC Derivatives Safe—A Fresh Look by Mr.Manmohan Singh Pdf

Recent regulatory efforts, especially in the U.S. and Europe, are aimed at reducing moral hazard so that the next financial crisis is not bailed out by tax payers. This paper looks at the possibility that central counterparties (CCPs) may be too-big-to-fail entities in the making. The present regulatory and reform efforts may not remove the systemic risk from OTC derivatives but rather shift them from banks to CCPs. Under the present regulatory overhaul, the OTC derivative market could become more fragmented. Furthermore, another taxpayer bailout cannot be ruled out. A reexamination of the two key issues of (i) the interoperability of CCPs, and (ii) the cost of moving to CCPs with access to central bank funding, indicates that the proposed changes may not provide the best solution. The paper suggests that a tax on derivative liabilities could make the OTC derivatives market safer, particularly in the transition to a stable clearing infrastructure. It also suggests reconsideration of a "public utility" model for the OTC market infrastructure.

Author : Olga Lewandowska
Publisher : BoD – Books on Demand
Page : 222 pages
File Size : 46,6 Mb
Release : 2020-04-30
Category : Business & Economics
ISBN : 9783838214443

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Post-Trade Processing of OTC Derivatives by Olga Lewandowska Pdf

The financial crisis of 2007–2009 exposed the weaknesses of the global over-the-counter (OTC) derivatives market such as limited transparency regarding risk exposures, poor counterparty risk management practices, and the risk of contagion arising from interconnectedness in this market. In the aftermath of the financial crisis, regulators introduced worldwide legislative and regulatory changes aimed at increasing the transparency and stability of the financial markets. In this book, Dr. Olga Lewandowska explores those novel regulatory solutions and their impact. The main focus is on central counterparty (CCP) clearing that became mandatory for OTC derivatives under the new regulatory paradigm. In four research papers, she analyzes CCP from different risk perspectives and based on four diverse research methods. Her book offers a comprehensive assessment of the risk-reduction potential of the CCPs, their implications for the financial markets, and the practical challenges in the implementation of the recent financial market reforms.

Author : David Murphy
Publisher : Springer
Page : 298 pages
File Size : 48,9 Mb
Release : 2013-08-07
Category : Business & Economics
ISBN : 9781137293862

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OTC Derivatives: Bilateral Trading and Central Clearing by David Murphy Pdf

After the credit crisis, supervisors enacted a range of financial reforms. In particular, they radically changed the nature of the OTC derivatives market via a number of measures, notably mandatory central clearing. This book discusses the market before the crisis, explains what central clearing is, and outlines the consequences of the new rules.

Author : Lombard Risk Management
Publisher : Palgrave Macmillan
Page : 0 pages
File Size : 43,8 Mb
Release : 2003-06-17
Category : Business & Economics
ISBN : 1349724157

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A Practical Guide to Collateral Management in the OTC Derivatives Market by Lombard Risk Management Pdf

This is the first book of its kind on the market and is aimed at collateral management professionals in the OTC derivatives markets. It is a guide to the key topics involved in establishing and running a collateral management function and is clear, comprehensive and practical. A Practical Guide to Collateral Management in the OTC Derivatives Market will also be of value to those professionals working in product areas applying collateral management techniques including repo, securities lending and exchange traded products.

Author : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment
Publisher : Unknown
Page : 172 pages
File Size : 52,7 Mb
Release : 2010
Category : Business & Economics
ISBN : UOM:39015090411797

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Reducing Risks and Improving Oversight in the OTC Credit Derivatives Market by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment Pdf

Author : Ms.Jennifer A. Elliott,Mr.John Kiff,Mr.Elias G. Kazarian,Jodi G. Scarlata,Carolyne Spackman
Publisher : International Monetary Fund
Page : 37 pages
File Size : 52,8 Mb
Release : 2009-11-01
Category : Business & Economics
ISBN : 9781451874006

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Credit Derivatives by Ms.Jennifer A. Elliott,Mr.John Kiff,Mr.Elias G. Kazarian,Jodi G. Scarlata,Carolyne Spackman Pdf

Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic risk; and (ii) should they be regulated more closely, and if so, how and to what extent? The paper begins with a basic description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic risk. It then reviews and evaluates some of the authorities' proposed initiatives, and discusses some alternative directions that could be taken.

Author : Jon Gregory
Publisher : John Wiley & Sons
Page : 328 pages
File Size : 42,6 Mb
Release : 2014-06-17
Category : Business & Economics
ISBN : 9781118891575

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Central Counterparties by Jon Gregory Pdf

Practical guidance toward handling the latest changes to the OTCderivatives market Central Counterparties is a practical guide to centralclearing and bilateral margin requirements, from one of theindustry's most influential credit practitioners. With up-to-dateinformation on the latest regulations imposed after the globalfinancial crisis, this book covers the mechanics of the clearingprocess and analyses the resulting consequences. Detaileddiscussion explains the ways in which the very significant clearingand margining rules will affect the OTC derivatives market and thefinancial markets in general, with practical guidance towardimplementation and how to handle the potential consequences. Over-the-counter derivatives were blamed by many for playing amajor role in the 2007 financial crisis, resulting in a significantattention and dramatic action by policymakers, politicians, andregulators to reduce counterparty credit risk which was seen as amajor issue in the crisis. The two most important regulatorychanges are the mandatory clearing of standardised OTC derivatives,and the requirements for bilateral margin posting in non-standardOTC contracts. Central Counterparties is a completereference guide to navigating these changes, providingclarification and practical advice. Review the mitigation of counterparty credit risk with thehistorical development of central clearing Clarify the latest regulatory requirements imposed byDodd-Frank, EMIR, Basel III and more Learn the mechanics of central clearing, with special attentionto complex issues such as margin calculations, the loss waterfall,client clearing and regulatory capital rules Gain insight into the advantages and disadvantages of clearingand bilateral margin requirements, and the potential issues thatarise As the clearing and margining mandates are phased in, theassociated costs will be severe enough to dramatically shift thetopology of the financial markets and transform the nature of risk.Central Counterparties provides the information,clarification and expert insight market practitioners need to getup to speed quickly.

Author : Ligia Catherine Arias-Barrera
Publisher : Routledge
Page : 280 pages
File Size : 43,7 Mb
Release : 2018-05-11
Category : Business & Economics
ISBN : 9781351797719

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Regulation and Supervision of the OTC Derivatives Market by Ligia Catherine Arias-Barrera Pdf

The over-the-counter (OTC) derivatives market has captured the attention of regulators after the Global Financial Crisis due to the risk it poses to financial stability. Under the post-crisis regulatory reform the concentration of business, and risks, among a few major players is changed by the concentration of a large portion of transactions in the new market infrastructures, the Central Counterparties (CCPs). This book, for the first time, analyses the regulatory response of the United Kingdom and the United States, the two largest centres of OTC derivatives transactions, and highlights their shortcomings. The book uses a normative risk-based approach to regulation as a methodological lens to analyse the UK regime of CCPs in the OTC derivatives market. It specifically focuses on prudential supervision and conduct of business rules governing OTC derivatives transactions and the move towards enhancing the use of central clearing. The resulting analysis, from a normative risk based approach, suggests that the UK regime for CCPs does not fulfil what would be expected if a coherent risk based approach was taken. Our comments on the Dodd-Frank Act highlight that the incoherent adoption of risk-based approach to regulation affects the effectiveness of the US regime for CCPs. Such a regime does not follow the pace of events of ‘innovation risk’; in particular, the foreseeable changes FinTech will bring to the OTCDM and central clearing services. The second inadequacy of the US regime concerns the dual regulatory structure of the CFTC and the SEC, and the inadequate adoption of different and not well-coordinated regulatory strategies. We also analyse the cross-border implications of the US regime for non-US CCPs that provide clearing services to US market participants. Finally, we study the negative effects of the absence of a clearly defined resolution regime for CCPs.

Author : Anonim
Publisher : Lulu.com
Page : 294 pages
File Size : 46,7 Mb
Release : 2004
Category : Bank capital
ISBN : 9789291316694

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International Convergence of Capital Measurement and Capital Standards by Anonim Pdf

Author : Anonim
Publisher : CEPS
Page : 62 pages
File Size : 45,7 Mb
Release : 2024-06-29
Category : Electronic
ISBN : 9789290799818

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Shaping Reforms and Business Models for the OTC Derivatives Market: Quo vadis? by Anonim Pdf

Author : Anonim
Publisher : Unknown
Page : 76 pages
File Size : 46,8 Mb
Release : 2007
Category : Derivative securities
ISBN : IND:30000116377924

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New Developments in Clearing and Settlement Arrangements for OTC Derivatives by Anonim Pdf

Author : Miguel A. Segoviano Basurto,Manmohan Singh
Publisher : INTERNATIONAL MONETARY FUND
Page : 19 pages
File Size : 52,5 Mb
Release : 2008-11-01
Category : Electronic
ISBN : 1451871163

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Counterparty Risk in the Over-The-Counter Derivatives Market by Miguel A. Segoviano Basurto,Manmohan Singh Pdf

The financial market turmoil of recent months has highlighted the importance of counterparty risk. Here, we discuss counterparty risk that may stem from the OTC derivatives markets and attempt to assess the scope of potential cascade effects. This risk is measured by losses to the financial system that may result via the OTC derivative contracts from the default of one or more banks or primary broker-dealers. We then stress the importance of "netting" within the OTC derivative contracts. Our methodology shows that, even using data from before the worsening of the crisis in late Summer 2008, the potential cascade effects could be very substantial. We summarize our results in the context of the stability of the banking system and provide some policy measures that could be usefully considered by the regulators in their discussions of current issues.

Author : Aron Gottesman,Michael Leibrock
Publisher : John Wiley & Sons
Page : 277 pages
File Size : 46,7 Mb
Release : 2017-06-26
Category : Business & Economics
ISBN : 9781119348504

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Understanding Systemic Risk in Global Financial Markets by Aron Gottesman,Michael Leibrock Pdf

An accessible and detailed overview of the risks posed by financial institutions Understanding Systemic Risk in Global Financial Markets offers an accessible yet detailed overview of the risks to financial stability posed by financial institutions designated as systemically important. The types of firms covered are primarily systemically important banks, non-banks, and financial market utilities such as central counterparties. Written by Aron Gottesman and Michael Leibrock, experts on the topic of systemic risk, this vital resource puts the spotlight on coherency, practitioner relevance, conceptual explanations, and practical exposition. Step by step, the authors explore the specific regulations enacted before and after the credit crisis of 2007-2009 to promote financial stability. The text also examines the criteria used by financial regulators to designate firms as systemically important. The quantitative and qualitative methods to measure the ongoing risks posed by systemically important financial institutions are surveyed. A review of the regulations that identify systemically important financial institutions The tools to use to detect early warning indications of default A review of historical systemic events their common causes Techniques to measure interconnectedness Approaches for ranking the order the institutions which pose the greatest degree of default risk to the industry Understanding Systemic Risk in Global Financial Markets offers a must-have guide to the fundamentals of systemic risk and the key critical policies that work to reduce systemic risk and promoting financial stability.

Author : Group of Ten. Committee on Payment and Settlement Systems
Publisher : Unknown
Page : 80 pages
File Size : 53,6 Mb
Release : 2004
Category : Clearing of securities
ISBN : IND:30000116787171

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Recommendations for Central Counterparties by Group of Ten. Committee on Payment and Settlement Systems Pdf