A systemic change of measure from central clearing

Injun Hwang and Baeho Kim

Journal of Futures Markets, 2022, vol. 42, issue 9, 1738-1754

Abstract: This study investigates the systemic impact of central clearing based on a financial network model in which edge weights represent the sensitivities of one participant's failure to its counterparties' default likelihood. The reduced‐form model specifies the mechanism of systemic risk concentration under central clearing in that a central counterparty redistributes the probability mass of the systemic failure from the center of the distribution into its tail. Numerical illustrations shed light on implications for regulating the adverse dependence between risk concentration under central clearing and the resiliency of the financial system via proper margin schemes.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/fut.22300

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:42:y:2022:i:9:p:1738-1754

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0270-7314

Access Statistics for this article

Journal of Futures Markets is currently edited by Robert I. Webb

More articles in Journal of Futures Markets from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().