Arbeitspapier

Crowded Trades: An Overlooked Systemic Risk for Central Clearing Counterparties

Counterparty default risk might hamper trade and trigger a financial crisis. The introduction of a central clearing counterparty (CCP) benefits trading but pushes systemic risk into CCP default. Standard risk management strategies at CCPs currently overlook a risk associated with crowded trades. This paper identifies it, measures it, and proposes a margin methodology that accounts for it. The application to actual CCP data illustrates that this hidden risk can become large, in particular at times of high CCP risk.

Language
Englisch

Bibliographic citation
Series: Tinbergen Institute Discussion Paper ; No. 14-065/IV/DSF75

Classification
Wirtschaft
Financial Economics: General
Subject
Financial economics

Event
Geistige Schöpfung
(who)
Menkveld, Albert J.
Event
Veröffentlichung
(who)
Tinbergen Institute
(where)
Amsterdam and Rotterdam
(when)
2014

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Menkveld, Albert J.
  • Tinbergen Institute

Time of origin

  • 2014

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