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Goethe-Universität Frankfurt am Main >
Center for Financial Studies (CFS), Universität Frankfurt a. M. >
CFS Working Paper Series, Universität Frankfurt a. M. >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/43277
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| Title: | | Central counterparties  |
| Authors: | | Koeppl, Thorsten V. Monnet, Cyril |
| Issue Date: | | 2008 |
| Series/Report no.: | | CFS Working Paper 2008/42 |
| Abstract: | | Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where trades are time-critical, liquidity is limited and there is limited enforcement of trades. We show a CCP novating trades implements efficient trading behaviour. It is optimal for the CCP to face default losses to achieve the efficient level of trade. To cover these losses, the CCP optimally uses margin calls, and, as the default problem becomes more severe, also requires default funds and then imposes position limits. |
| Subjects: | | Central Counterparty Clearing Default Collateral Risk Management |
| JEL: | | G20 G30 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CFS Working Paper Series, Universität Frankfurt a. M.
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