Anti-cyclical versus Risk-sensitive Margin Strategies in Central Clearing

Berlinger, Edina and Dömötör, Barbara and Illés, Ferenc (2017) Anti-cyclical versus Risk-sensitive Margin Strategies in Central Clearing. Working Paper. Corvinus University of Budapest Faculty of Economics, Budapest.

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We analyzed the effects of different margin strategies on the loss distribution of a clearinghouse during different crises. First, we developed a general one-period analytical model and proved the existence of a unique optimal margin which is not necessarily risk-sensitive even in a weaker sense. Then, we simulated the operation of a hypothetical clearinghouse active on the US stock futures market in the period 2008-2015. We found that anti-cyclical margin strategies might be optimal also for clearinghouses focusing on their micro-level financial stability, not only for regulators aiming to reduce systemic risk. Anti-cyclical margin strategies performed especially well in minor crises like Flash Crash.

Item Type:Monograph (Working Paper)
Series Name:Corvinus Economics Working Papers - CEWP
Series Number / Identification Number:2017/03
Uncontrolled Keywords:financial stability, clearinghouse, central counterparty, EMIR, agent-based simulation, stochastic dominance
JEL classification:G20 - Financial Institutions and Services: General
G28 - Financial Institutions and Services: Government Policy and Regulation
Funders:János Bolyai Research Scholarship of the Hungarian Academy of Sciences
ID Code:2894
Deposited By: Ádám Hoffmann
Deposited On:02 Jun 2017 07:46
Last Modified:02 Jun 2017 07:46

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