In the event of a clearing member's default, and as part of its default management process, a central counterparty (CCP) will need to hedge the defaulter's portfolio and to close-out its positions. However, the CCP may not be able to do this without incurring additional losses if the market is...

Evidence that the distribution of daily changes of exchange rates has fatter tails than the normal has led researchers to consider different alternative distributions to estimate quantile-based risk measures. In this paper we investigate the ability of SU-curves to capture fat tail risk of...

Financial institutions have for many years sought measures which cogently summarise the diverse market risks in portfolios of financial instruments. This quest led institutions to develop Value-at-Risk (VaR) models for their trading portfolios in the 1990s. Subsequently, so-called filtered...

The maturity effect states that the volatility of futures prices should increase as the contract approaches expiration. Numerous studies have investigated this effect for different asset classes. However, the presence of a maturity effect in short term interest rate (STIR) futures has usually...

This study contributes to the debate about the effectiveness of monetary policy transmission mechanisms by exploring the link between the Mexican Central Bank's monetary policy announcements and interest rates futures volatility. The results show that announcements have a positive and...

The growing importance of the Mexican TIIE-futures, which are amongst the most actively traded derivatives contracts worldwide, motivates the examination of their behavior. In particular, this study addresses the question of two sources of nonstationarity, day-of-the-week effects and abnormal...

Margin requirements protect a central counterparty (CCP) and its users against potential losses generated by the default of any of its members. They have several components, one of them being the initial margin requirement, which is typically calculated using a market risk model to estimate the...