Clearing house; Micro-simulation; Risk analysis; Finance; Economics and Econometrics
Abstract :
[en] We examine the effects of different margin strategies on the loss distribution of a clearing house during various crises of different stock price trends, volatility expectations, bid-ask spreads, and funding liquidity. We simulate a hypothetical clearing house active on the US stock futures market 2008–2015, investigating its micro-level stability. We find that it might be optimal to replace the strict risk-sensitive margin strategy by more anti-cyclical ones. The extreme anti-cyclical strategy (full smoothing), however, was suboptimal on this sample. Our results may help institutions elaborate their margin strategies to develop risk management systems in line with new regulations.
Disciplines :
Finance
Author, co-author :
BERLINGER, Edina ; University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Department of Finance (DF) ; Corvinus University of Budapest, Department of Finance, Hungary
Dömötör, Barbara; Corvinus University of Budapest, Department of Finance, Hungary
Illés, Ferenc; Corvinus University of Budapest, Department of Finance, Hungary
External co-authors :
yes
Language :
English
Title :
Anti-cyclical versus risk-sensitive margin strategies in central clearing
Publication date :
September 2019
Journal title :
Journal of International Financial Markets, Institutions and Money
This research was supported by the scholarship of János Bolyai of the Hungarian Academy of Sciences. We also thank the colleagues of the KELER CCP and the participants of the 2017 Annual Financial Market Conference for their valuable comments.
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