Leverage and derivatives: The case of Archegos

Antoine Bouveret and Martin Haferkorn
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Antoine Bouveret: Senior Economist, European Securities and Markets Authority, France
Martin Haferkorn: Risk Analysis Officer, European Securities and Markets Authority, France

Journal of Securities Operations & Custody, 2023, vol. 15, issue 3, 238-250

Abstract: In March 2021, the default of Archegos, a US family office, led to large losses for some global banks. Archegos was able to accumulate large exposures to, and leverage on, equities by entering into derivatives transactions with bank counterparties. When the price of the underlying stocks started to decline, the firm was unable to meet variation margins, resulting in the liquidation of the stocks by the counterparty banks. In this paper, European Market Infrastructure Regulation (EMIR) data is used to analyse Archegos’ positions and show that it is possible to track the steep increase in concentrated exposures that the family office undertook in February and March 2021. The findings show how regulatory data collected under EMIR can be used to monitor leverage and concentration risk in derivatives markets.

Keywords: leverage; equity swaps; margins; procyclicality (search for similar items in EconPapers)
JEL-codes: E5 G2 K22 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aza:jsoc00:y:2023:v:15:i:3:p:238-250

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