We present CoMargin, a new methodology to estimate collateral requirements in derivatives central counterparties (CCPs). CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes trading externalities and...

We investigate the causal structure of financial systems by accounting for contemporaneous relationships. To identify structural parameters, we introduce a novel non-parametric approach that exploits the fact that most financial data empirically exhibit heteroskedasticity. The identification...

The selection of upper order statistics in tail estimation is notoriously difficult. Methods that are based on asymptotic arguments, like minimizing the asymptotic MSE, do not perform well in finite samples. Here, we advance a data-driven method that minimizes the maximum distance between the...

The increasing importance of risk management in payment systems has led to the development of an array of sophisticated tools designed to mitigate tail risk in these systems. In this paper, we use extreme value theory methods to quantify the level of tail risk in the Canadian retail payment...

This paper estimates potential exposures, netting benefits and settlement gains by merging retail and wholesale payments into batches and conducting multiple intraday settlements in this hypothetical model of a single "calibrated payments system." The results demonstrate that credit risk...

We present CoMargin, a new methodology to estimate collateral requirements for central counterparties (CCPs) in derivatives markets. CoMargin depends on both the tail risk of a given market participant and its interdependence with other participants. Our approach internalizes market...

The author constructs a formal analytic framework to simulate the impact of various economic shocks on the household debt-service ratio, using data from the Canadian Financial Monitor (CFM) survey. The impact of these shocks on individual households depends on the socio-economic characteristics...

We estimate a structural model derived from the balance sheet identity to evaluate the effects of contagion and common exposure on banks' capital, which varies endogenously as a function of assets and liabilities. Through a regression approach inspired by the literature on structural vector...

Rising levels of household indebtedness have created concerns about the vulnerabilities of households to adverse economic shocks and the impact on financial stability. To assess these risks, the author presents a formal stress-testing framework that uses microdata to simulate how various...