EconPapers    
Economics at your fingertips  
 

Systemic risk in clearing houses: Evidence from the European repo market

Charles Boissel, François Derrien, Evren Ors and David Thesmar

Journal of Financial Economics, 2017, vol. 125, issue 3, 511-536

Abstract: We study how crises affect Central Clearing Counterparties (CCPs). We focus on a large and safe segment of the CCP-cleared repo market during the Eurozone sovereign debt crisis. We develop a simple model to infer CCP stress, which is measured as repo rates’ sensitivity to sovereign credit default swaps (CDS) spreads and jointly captures (1) the effectiveness of haircut policies, (2) CCP-member default risk (conditional on sovereign default), and (3) CCP default risk (conditional on both sovereign and CCP-member default). During 2011, repo rates strongly respond to sovereign risk, particularly for Greece, Italy, Ireland, Portugal and Spain (GIIPS): Repo investors behaved as if the conditional probability of CCP default was substantial.

Keywords: Repurchase agreement; Sovereign debt crisis; LTRO; Secured money market lending; Clearing houses (search for similar items in EconPapers)
JEL-codes: E58 E43 G01 G21 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X17301277
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Systemic risk in clearing houses: Evidence from the European repo market (2016) Downloads
Working Paper: Systemic Risk in Clearing Houses: Evidence from the European Repo Market (2015) Downloads
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:eee:jfinec:v:125:y:2017:i:3:p:511-536

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2017-11-16
Handle: RePEc:eee:jfinec:v:125:y:2017:i:3:p:511-536