Arbeitspapier

Empirical analysis of collateral at central counterparties

This paper studies the risk management of central counterparties (CCPs) using a granular transaction-level dataset. We test whether margining practices are sufficient relative to portfolio risk and whether CCPs reduce margin requirements in a "race-to-the-bottom." We find that, for some CCPs, margin breaches are predictable ex ante, but the portfolios of more interconnected clearing members are associated with higher margin holdings. While margin requirements increased significantly around the onset of the Covid-19 pandemic, controlling for portfolio and macro-financial variables, margin breaches did not. Our results indicate that changes in margins should be analyzed alongside margin breaches.

ISBN
978-92-9472-238-6
Language
Englisch

Bibliographic citation
Series: ESRB Working Paper Series ; No. 131

Classification
Wirtschaft
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
International Financial Markets
Subject
CCP
risk management
initial margin
variation margin

Event
Geistige Schöpfung
(who)
Grothe, Magdalena
Pancost, N. Aaron
Tompaidis, Stathis
Event
Veröffentlichung
(who)
European Systemic Risk Board (ESRB), European System of Financial Supervision
(where)
Frankfurt a. M.
(when)
2021

DOI
doi:10.2849/207957
Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Grothe, Magdalena
  • Pancost, N. Aaron
  • Tompaidis, Stathis
  • European Systemic Risk Board (ESRB), European System of Financial Supervision

Time of origin

  • 2021

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