What do network theory and endogenous risk theory have to say about the effects of central counterparties on systemic stability?

Jp. Zigrand

Financial Stability Review, 2010, issue 14, 153-160

Abstract: Central counterparties (CCPs) alter the connectivity structure of financial institutions (FIs), and therefore the transmission of shocks. What does network theory have to say about the effects of CCPs on systemic stability, and how do different CCP structures (e.g. one vs multiple CCPs) alter systemic risk from a solvability point of view? CCPs not only alter the direct interconnection of FIs through their balance sheets, they also affect FIs and the links between them indirectly through prices. Prices are endogenous and are not only determined by the actions of the FIs, but they in turn constitute imperatives for FIs to act through marking-to-market and risk-sensitive constraints, both natural ingredients of CCPs. Could such feedback effects from CCPs amplify market movements and financial stress?

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... eview-14_2010-07.pdf (application/pdf)

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:bfr:fisrev:2010:14:18

Access Statistics for this article

More articles in Financial Stability Review from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().