Anti-cyclical versus Risk-sensitive Margin Strategies in Central Clearing
Edina Berlinger (),
Barbara Dömötör () and
Corvinus Economics Working Papers (CEWP) from Corvinus University of Budapest
We analyzed the effects of different margin strategies on the loss distribution of a clearinghouse during different crises. First, we developed a general one-period analytical model and proved the existence of a unique optimal margin which is not necessarily risk-sensitive even in a weaker sense. Then, we simulated the operation of a hypothetical clearinghouse active on the US stock futures market in the period 2008-2015. We found that anti-cyclical margin strategies might be optimal also for clearinghouses focusing on their micro-level financial stability, not only for regulators aiming to reduce systemic risk. Anti-cyclical margin strategies performed especially well in minor crises like Flash Crash.
Keywords: financial stability; clearinghouse; central counterparty; EMIR; agent-based simulation; stochastic dominance (search for similar items in EconPapers)
JEL-codes: G20 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
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Journal Article: Anti-cyclical versus risk-sensitive margin strategies in central clearing (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:cvh:coecwp:2017/03
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