Arbeitspapier
The Limits of Central Counterparty Clearing: Collusive Moral Hazard and Market Liquidity
Can central counterparty (CCP) clearing control counterparty risk in the presence of risk taking that can aggravate such risk? When counterparty risk is not observable, I show that central clearing leads to higher collateral requirements for two different reasons. Without collusion about risk taking, a CCP offering diversification of risk cannot selectively forgo incentives for transactions that use collateral only for insurance. With collusion about risk taking, a CCP needs to charge collateral in line with the worst counterparty quality to control risk taking. Requiring more collateral reduces market liquidity and worsens incentives causing a feedback effect that amplifies collateral costs.
- Sprache
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Englisch
- Erschienen in
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Series: Queen's Economics Department Working Paper ; No. 1312
- Klassifikation
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Wirtschaft
Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Corporate Finance and Governance: Government Policy and Regulation
Asymmetric and Private Information; Mechanism Design
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- Thema
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CCP Clearing
Counterparty Risk
Moral Hazard
Collateral
Market Liquidity
- Ereignis
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Geistige Schöpfung
- (wer)
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Koeppl, Thorsten V.
- Ereignis
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Veröffentlichung
- (wer)
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Queen's University, Department of Economics
- (wo)
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Kingston (Ontario)
- (wann)
-
2013
- Handle
- Letzte Aktualisierung
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10.03.2025, 11:42 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Koeppl, Thorsten V.
- Queen's University, Department of Economics
Entstanden
- 2013