This paper develops a new framework for the design of collateral requirements in a centrally cleared market. Clearing members post collateral - initial margins and default funds - to increase their pledgeable income, thereby credibly committing to risk management. We show that initial margins...

Drawdowns measuring the decline in value from the historical running maxima over a given period of time, are considered as extremal events from the standpoint of risk management. To date, research on the topic has mainly focus on the side of severity by studying the first drawdown over certain...