This paper develops a new framework for the design of collateral requirements in a centrally cleared market. Clearing …

demand of new margin and clearing practices and regulations. We decompose collateral demand for both customers and dealers … impact on collateral demand of more widespread initial margin requirements, increased novation of CDS to central clearing … parties (CCPs), an increase in the number of clearing members, the proliferation of CCPs of both specialized and non …

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 …

severe, also requires default funds and then imposes position limits. -- Central Counterparty ; Clearing; Default …

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 …

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 …