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In this working paper, we study the three generic clearing arrangements in the presence of two-sided limited commitment …: simple bilateral clearing, segregated collateral clearing through a third party, and - most sophisticated of all - central … counterparty (CCP) clearing. Clearing secures the settlement of obligations from over-the-counter (OTC) forward contracts that …
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Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where trades are time-critical, liquidity is limited and there is limited enforcement of trades. We show a CCP novating trades implements efficient trading behaviour. It...
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During the financial crisis of the last few months, transfer systems have been faced with extreme, operating conditions. In spite of the scale of the shocks, transfer systems have functioned well and demonstrated their resilience. The financial crisis has also highlighted the importance of...
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