IDEAS home Printed from https://ideas.repec.org/a/bis/bisqtr/1106h.html
   My bibliography  Save this article

Expansion of central clearing

Author

Listed:
  • Daniel Heller
  • Nicholas Vause

Abstract

By the end of 2012, all standardised over-the-counter (OTC) derivatives will have to be cleared through central counterparties (CCPs). We estimate the financial resources that different CCPs would need to clear safely the full volume of interest rate swaps and credit default swaps currently held by major derivatives dealers. Our results suggest that these dealers already have sufficient unencumbered assets to meet initial margin requirements, but that a few may need to increase their cash holdings to meet variation margin calls in a timely way. We also find that the potential costs of individual or multiple dealer defaults for CCPs and their non-defaulting clearing members are likely to be small relative to their equity as long as CCPs factor into initial margin requirements the extent of tail risk and time variation in risk of different types of derivatives. Finally, clearing different types of OTC derivatives in a single CCP could reduce both margins and collective loss-absorbing resources.

Suggested Citation

  • Daniel Heller & Nicholas Vause, 2011. "Expansion of central clearing," BIS Quarterly Review, Bank for International Settlements, June.
    • Handle: RePEc:bis:bisqtr:1106h
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/qtrpdf/r_qt1106h.pdf
    Download Restriction: no
    File URL: http://www.bis.org/publ/qtrpdf/r_qt1106h.htm
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stefania D'Amico & Roger Fan & Yuriy Kitsul, 2013. "The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors," Working Paper Series WP-2013-22, Federal Reserve Bank of Chicago.
    2. Anouk Levels & Jeannette Capel, 2012. "Is Collateral Becoming Scarce? Evidence for the euro area," DNB Occasional Studies 1001, Netherlands Central Bank, Research Department.
    3. Lenz, Rainer, 2011. "Get rid of banks and build up a modern financial world," MPRA Paper 33501, University Library of Munich, Germany.
    4. Berndsen, Ron, 2020. "Five Fundamental Questions on Central Counterparties," Discussion Paper 2020-028, Tilburg University, Center for Economic Research.
    5. Sidanius, Che & Wetherilt, Anne, 2012. "Financial Stability Paper No 14: Thoughts on determining central clearing eligibility of OTC derivatives," Bank of England Financial Stability Papers 14, Bank of England.

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:bisqtr:1106h. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Beslmeisl (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.