reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding … moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is … beneficial for single market participants in the presence of a sufficiently large number of clearing members. We show that three …

reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding … moving from a bilateral to a clearing architecture for derivative markets. Previous studies suggest that central clearing is … beneficial for single market participants in the presence of a sufficiently large number of clearing members. We show that three …

allocating resources to cover defaults of clearing members and clients. However, central counterparties face competing objectives … central clearing, using a unique and comprehensive dataset containing all U.S. cleared and bilateral credit default swap … system, the presence of client clearing obligations for members, and the distribution of losses among market participants …

This paper studies the optimal clearing arrangement for bilateral financial contracts in which an assessment of …, at a cost, about the commitment of their borrowers, which affects the assessment of counterparty risk. Clearing through a … and reveal information. If information acquisition is incentive‐compatible, then lenders choose central clearing. If it is …

. Such a loss can be incurred whenever the CCP has insufficient funds to unwind the portfolio of a defaulting clearing member … show in particular that a clearing member's CCP risk is given by a sum of exposures to each of the other clearing members … collateral. We provide a model to calculate the exposures by specifying the parameterized loss distributions of the individual …

defaulting member. We consider schemes that use a collateral pool calculated using a rolling time window. Our simulations show … that the size of the window has a very significant effect on the average level of collateral and its variability day to day …, creating an interesting trade-off. Collateral levels and variability may be important for ACSS participants because they could …

Bilateral financial contracts typically require an assessment of counterparty risk. Central clearing of these financial … and to reveal information about such risk. When considering this trade-off, participants would choose central clearing if … information acquisition is incentive compatible. If it is not, they may prefer bilateral clearing, when this choice prevents …

interconnected clearing members are associated with higher margin holdings. While margin requirements increased significantly around …

such risk? When counterparty risk is not observable, I show that central clearing leads to higher collateral requirements …Can central counterparty (CCP) clearing control counterparty risk in the presence of risk taking that can aggravate … forgo incentives for transactions that use collateral only for insurance. With collusion about risk taking, a CCP needs to …

This paper studies how creditors behave under costly collateral enforcement. I exploit quasi-experimental variation in …