CoMargin

Jorge Cruz Lopez, Jeffrey Harris, Christophe Hurlin and Christophe Perignon ()

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Abstract: We present CoMargin, a new methodology to estimate collateral requirements in derivatives central counterparties (CCPs). CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes trading externalities and enhances the stability of CCPs, thus, reducing systemic risk concerns. We assess our methodology using proprietary data from the Canadian Derivatives Clearing Corporation that include daily observations of the actual trading positions of all of its members from 2003 to 2011. We show that CoMargin outperforms existing margining systems by stabilizing the probability and minimizing the shortfall of simultaneous margin-exceeding losses.

Keywords: Collateral; Central Counterparties (CCPs); Derivatives Markets; Extreme Dependence (search for similar items in EconPapers)
Date: 2015-12-15
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00979440v3
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Related works:
Journal Article: CoMargin (2017)
Working Paper: CoMargin (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:halshs-00979440

DOI: 10.2139/ssrn.1943562

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