Template-Type: ReDIF-Paper 1.0
Author-Name: Wenqian Huang
Author-X-Name-First: Wenqian
Author-X-Name-Last: Huang
Author-Name: Albert Menkveld
Author-X-Name-First: Albert
Author-X-Name-Last: Menkveld
Author-Name: Shihao Yu
Author-X-Name-First: Shihao
Author-X-Name-Last: Yu
Title: Central counterparty exposure in stressed markets
Abstract: Time is valuable, particularly in stressed markets. As central counterparties (CCPs) have become systemically important, we need to understand the dynamics of their exposure towards clearing members at high frequencies. We track such exposure and decompose it, yielding the following insights. The composition of CCP exposure is fundamentally different in the tails. At extreme levels or during rapid increases, there is elevated crowding. This is the result of clearing members all concentrating their positions on a single security or a particular portfolio, which is desirable if motivated by hedging but worrying if due to speculation.
Length: 51 pages
Creation-Date: 2019-12
File-URL: https://www.bis.org/publ/work833.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work833.htm
File-Format: text/html
Number: 833
Classification-JEL: G10, G23, G20
Keywords: central counterparties (CCPs), crowding risk, market stress
Handle: RePEc:bis:biswps:833