This paper studies the risk management of central counterparties (CCPs) using a granular transaction-level dataset. We … test whether margining practices are sufficient relative to portfolio risk and whether CCPs reduce margin requirements in a …

adjustment to derivative prices, known as a funding value adjustment (FVA), which is interlinked with the posting of collateral … of collateral in a trade to mitigate the counterparty credit risk. Another is the realization that banks are not risk …. In this paper, we extend the Cox, Ross and Rubinstein (CRR) discrete-time model to include collateral and FVA. We prove …