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Central counterparties and the topology of clearing networks

Author

Listed:
  • Galbiati, Marco

    (Bank of England)

  • Soramaki, Kimmo

    (Financial Network Analytics)

Abstract

Given a network of client-clearer relationships, we define central clearing as a function transforming bilateral trading exposures into centrally cleared exposures. By using numerical simulations, we study how this function is affected by the network's topology, focusing on the exposures of the central counterparty. By assuming that margin requirements are a linear function of exposures, we also draw conclusions as to how the network topology affects aggregate margin requirements.

Suggested Citation

  • Galbiati, Marco & Soramaki, Kimmo, 2013. "Central counterparties and the topology of clearing networks," Bank of England working papers 480, Bank of England.
    • Handle: RePEc:boe:boeewp:0480
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    References listed on IDEAS

    as
    1. Wetherilt, Anne & Zimmerman, Peter & Soramaki, Kimmo, 2010. "The sterling unsecured loan market during 2006-08: insights from network theory," Bank of England working papers 398, Bank of England.
    2. Becher, Christopher & Millard, Stephen & SoramÃÂäki, Kimmo, 2008. "The network topology of CHAPS Sterling," Bank of England working papers 355, Bank of England.
    3. Bech, Morten L. & Atalay, Enghin, 2010. "The topology of the federal funds market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5223-5246.
    4. James T. Moser, 2002. "The immediacy implications of exchange organization," Working Paper Series WP-02-09, Federal Reserve Bank of Chicago.
    5. Q. Farooq Akram & Casper Christophersen, 2010. "Interbank overnight interest rates - gains from systemic importance," Working Paper 2010/11, Norges Bank.
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    Cited by:

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    2. Maurin, Vincent, 2022. "Asset scarcity and collateral rehypothecation," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    3. Gaffeo Edoardo & Gobbi Lucio, 2021. "Achieving financial stability during a liquidity crisis: a multi-objective approach," Risk Management, Palgrave Macmillan, vol. 23(1), pages 48-74, June.

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    More about this item

    Keywords

    Central counterparty; CCP; clearing; settlement; network analysis;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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