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Clearing House, Margin Requirements, and Systemic Risk

Review of Futures Markets, Vol. 19 (2011)
2011
  • 3
    Citations
  • 945
    Usage
  • 0
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    3
    • Citation Indexes
      3
  • Usage
    945
    • Abstract Views
      813
    • Downloads
      132
  • Ratings
    • Download Rank
      438,334

Paper Description

Margins are the major safeguards against default risk on a derivatives exchange. When the clearing house sets margin requirements, it does so by only focusing on individual clearing firm positions (e.g., the SPAN system). We depart from this traditional approach and present an alternative method that accounts for inter-dependencies among clearing members when setting margins. Our method generalizes the SPAN system by allowing individual margins to increase when clearing firms are more likely to be in financial distress simultaneously.

Bibliographic Details

Jorge Cruz Lopez; Jeffrey H. Harris; Christophe Pérignon

derivatives; tail risk; default risk; extreme dependence; copulas

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