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Loss absorption capacity of central counterparties. Evidence from EU-authorised CCPs – part II

Author

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  • Weronika Rec

    (Warsaw School of Economics, Collegium of Management and Finance)

Abstract

The aim of this study was to investigate loss absorption capacity of central counterparties. The qualitative and quantitative analysis was based on PQD data provided by 15 EU-authorised CCPs for Q4 2015–Q4 2017. Certain indicators were proposed in order to delineate the empirical structure of CCPs’ default waterfalls and to assess the viability and stability of CCPs. The main conclusion of the analysis is that in order to incentivise clearing participants as much as possible towards prudent risk management, the structure of default waterfall should be modified.

Suggested Citation

  • Weronika Rec, 2019. "Loss absorption capacity of central counterparties. Evidence from EU-authorised CCPs – part II," Bank i Kredyt, Narodowy Bank Polski, vol. 50(5), pages 429-456.
    • Handle: RePEc:nbp:nbpbik:v:50:y:2019:i:5:p:429-456
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    File URL: https://bankikredyt.nbp.pl/content/2019/05/BIK_05_2019_01.pdf
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    References listed on IDEAS

    as
    1. Lin, Li & Surti, Jay, 2015. "Capital requirements for over-the-counter derivatives central counterparties," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 140-155.
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    More about this item

    Keywords

    CCP; central clearing; default waterfall; financial stability; liquidity risk;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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