Economics at your fingertips  

Systemic risk in derivatives markets: a pilot study using CDS data

Robleh Ali (), Nicholas Vause () and Filip Zikes ()
Additional contact information
Robleh Ali: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Filip Zikes: Office of Financial Stability Policy and Research, Postal: Board of Governors of the Federal Reserve System, Washington DC 20551, United States

No 38, Bank of England Financial Stability Papers from Bank of England

Abstract: In this paper, we draw on network analysis and a sample of derivatives data from a trade repository to demonstrate how the systemic importance of derivatives market participants may be measured. As trade repository data become more comprehensively available to authorities, the same measures could be applied more broadly. We consider the importance of market participants both to the smooth functioning of derivatives markets and in terms of their potential contribution to financial distress. In relation to market functioning, we study some measures that take into account only immediate counterparty positions and others that consider the whole counterparty network of positions. In some cases, the network of positions beyond immediate counterparties makes a significant difference to the rank ordering of the systemic importance of institutions. This means it is important for authorities responsible for financial stability to have access to data beyond the counterparty positions of institutions in their own jurisdictions. In relation to financial distress, we highlight the importance of identifying institutions which may contribute to liquidity strains, as increasing collateralisation of counterparty exposures will diminish credit risk but could at times sharply raise demand for liquid assets to post as collateral.

Keywords: derivates; systemic risk; CDS data (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016-07-08
References: Add references at CitEc
Citations: View citations in EconPapers (16) Track citations by RSS feed

Downloads: (external link) ... 9D6A3E30569908D33D06 Full text (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:

Access Statistics for this paper

More papers in Bank of England Financial Stability Papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().

Page updated 2023-03-26
Handle: RePEc:boe:finsta:0038