Using speed and credit limits to address the procyclicality of initial margin at central counterparties / by Nikil Chande and Nicholas Labelle St-Pierre.: FB3-6/2016-18E-PDF
"This paper proposes a practical approach to address the procyclicality of initial margin at central counterparties (CCPs) that can work even in periods of extreme stress. The approach allows CCPs to limit the speed of margin increases resulting from spikes in market volatility. To maintain the desired level of risk protection, the model covers, through loss-sharing arrangements, a chosen number of the largest shares of the margin increases that are deemed procyclical. To facilitate adoption of this approach, we allow loss sharing to be capped through the allocation of bilateral credit limits. We undertake an empirical exercise to demonstrate that, even with conservative assumptions, the proposed approach can generate significant margin relief without generating losses that cannot be absorbed by clearing members" - Abstract - p.ii.
Permanent link to this Catalogue record:
publications.gc.ca/pub?id=9.824057&sl=0
| Department/Agency | Bank of Canada. |
|---|---|
| Title | Using speed and credit limits to address the procyclicality of initial margin at central counterparties / by Nikil Chande and Nicholas Labelle St-Pierre. |
| Series title | Staff discussion paper, 1914-0568 ; 2016-18 |
| Publication type | Series - View Master Record |
| Language | [English] |
| Format | Electronic |
| Electronic document | |
| Note(s) | "September 2016." Includes bibliographical references. Text in English, abstract in English and French. |
| Publishing information | [Ottawa] : Bank of Canada, c2016. |
| Author / Contributor | Chande, Nikil. St-Pierre, Nicholas Labelle. |
| Description | ii, 24 p. : graphs. |
| Catalogue number |
|
| Subject terms | Financial analysis |