OTC Clearing Arrangements for Bank Systemic Risk Regulation: A Simulation Approach

Olga Lewandowska

Journal of Money, Credit and Banking, 2015, vol. 47, issue 6, 1177-1203

Abstract: Based on a simulation approach, this paper compares different over‐the‐counter (OTC) clearing models regarding their netting efficiency and loss‐concentration implications. The results indicate that the mandatory clearing of all standardized OTC derivatives by a Central Counterparty (CCP) propagated by regulators would significantly decrease systemic risk as compared to existing clearing arrangements only if the multilateral netting benefits of the CCP and loss mutualization are fully attained. Therefore, regulators have to ensure that there is a critical mass of asset classes under mandatory clearing, that broad market participation in the CCP is enabled, and that there is an appropriate client asset protection regime.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://doi.org/10.1111/jmcb.12241

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:jmoncb:v:47:y:2015:i:6:p:1177-1203

Access Statistics for this article

Journal of Money, Credit and Banking is currently edited by Robert deYoung, Paul Evans, Pok-Sang Lam and Kenneth D. West

More articles in Journal of Money, Credit and Banking from Blackwell Publishing
Bibliographic data for series maintained by Wiley Content Delivery ().