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Compensation par contrepartie centrale et assurance contre le risque systémique sur les marchés dérivés de gré à gré

Author

Listed:
  • Thorsten V. Koeppl
  • Cyril Monnet

Abstract

How can Central Counterparty (CCP) clearing help to make the over-the-counter (OTC) derivatives market safer? To answer this question, we lay out two views of risk management. The ?contract view? considers how to control the loss given default, while the ?counterparty view? looks at the likelihood of a default first and, hence, at the incentives to take on risks. Applying the latter view to the market for OTC derivatives, we argue that the risk transfer that characterizes CCP clearing leads to incentives for individual risk-taking, as well as a collective failure of participants to take into account that the OTC derivatives market concentrates aggregate, system-wide risk. With central clearing this systemic risk externality worsens, as CCPs concentrate this risk further and become too-big-to-fail. To correct this problem, we propose the establishment of systemic risk insurance as a necessary component of CCP clearing in OTC derivatives markets. Classification JEL: G18, G23.

Suggested Citation

  • Thorsten V. Koeppl & Cyril Monnet, 2013. "Compensation par contrepartie centrale et assurance contre le risque systémique sur les marchés dérivés de gré à gré," Revue d'économie financière, Association d'économie financière, vol. 0(1), pages 179-196.
    • Handle: RePEc:cai:refaef:ecofi_109_0179
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    Cited by:

    1. Berndsen, Ron, 2020. "Five Fundamental Questions on Central Counterparties," Discussion Paper 2020-028, Tilburg University, Center for Economic Research.

    More about this item

    JEL classification:

    • 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

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