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An Incentive Theory of Counterparty Risk, Margins, and CCP Design

In: Achieving Financial Stability Challenges to Prudential Regulation

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  • Florian Heider

Abstract

Central clearing counterparties (CCPs) play an important role in financial markets. Clearing is the process of settling a trade agreement on the accounts of the transacting parties. A CCP is an agent who interposes herself between all buyers and sellers that agree to use the CCP. Through a process called “novation,” a CCP becomes the buyer to many sellers and the seller to many buyers…

Suggested Citation

  • Florian Heider, 2017. "An Incentive Theory of Counterparty Risk, Margins, and CCP Design," World Scientific Book Chapters, in: Douglas D Evanoff & George G Kaufman & Agnese Leonello & Simone Manganelli (ed.), Achieving Financial Stability Challenges to Prudential Regulation, chapter 15, pages 209-224, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813223400_0015
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    More about this item

    Keywords

    Money and Banking; International Banking; Financial Instititions; Banks; Regulations; Compliance; Financial Crisis; Great Financial Crisis 2008; Microprudential; Macroprudential; Financial Stability;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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