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Central counterparties and the topology of clearing networks

Listed author(s):
  • Galbiati, Marco

    ()

    (Bank of England)

  • Soramaki, Kimmo

    ()

    (Financial Network Analytics)

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.

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File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2013/wp480.pdf
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Paper provided by Bank of England in its series Bank of England working papers with number 480.

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Length: 31 pages
Date of creation: 16 Aug 2013
Handle: RePEc:boe:boeewp:0480
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  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. Q. Farooq Akram & Casper Christophersen, 2010. "Interbank overnight interest rates - gains from systemic importance," Working Paper 2010/11, Norges Bank.
  4. 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.
  5. James T. Moser, 2002. "The immediacy implications of exchange organization," Working Paper Series WP-02-09, Federal Reserve Bank of Chicago.
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