This note discusses the basic economics of central clearing for derivatives and the need for a proper regulation …, supervision and resolution of central counterparty clearing houses (CCPs). New regulation in the U.S. and in Europe renders the … government bailout, there is a public policy issue here. ii) As long as no monopoly CCP exists, there is competition for market …

default impacts the incentives of other agents to escape default. Agents' payoffs are determined by the clearing mechanism …, we show that introducing a central clearing counterparty achieves the efficient equilibrium at no additional cost. …