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The distribution of clearing members’ risk exposure and how it matters

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  • Olga Lewandowska
  • Edgar Mai

Abstract

Since 2015, central counterparties (CCPs) have published their Committee on Payments and Market Infrastructures–International Organization of Securities Commissions (CPMI–IOSCO) quantitative disclosures, providing insights into the risk concentrations within their member bases. The distribution of clearing members’ risk exposure has a major impact on the effectiveness of risk management in the CCP, including on default fund practices. This paper sheds light on the consequences of risk distribution within a member base and the adequacy of the cover 2 principle. In addition to CPMI–IOSCO disclosures from three CCPs, we utilize a novel data set that contains comprehensive information about historical margins in a leading clearing house.

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Handle: RePEc:rsk:journ7:6171416
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File URL: https://www.risk.net/system/files/digital_asset/2018-12/The_distribution_of_CMs_risk_exposure.pdf
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