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Counterparty Risk In The Over The Counter Derivatives Market
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Author :Miguel A. Segoviano Basurto Publisher :INTERNATIONAL MONETARY FUND ISBN 13 :9781451871166 Total Pages :19 pages Book Rating :4.8/5 (711 download)
Book Synopsis Counterparty Risk in the Over-The-Counter Derivatives Market by : Miguel A. Segoviano Basurto
Download or read book Counterparty Risk in the Over-The-Counter Derivatives Market written by Miguel A. Segoviano Basurto and published by INTERNATIONAL MONETARY FUND. This book was released on 2008-11-01 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial market turmoil of recent months has highlighted the importance of counterparty risk. Here, we discuss counterparty risk that may stem from the OTC derivatives markets and attempt to assess the scope of potential cascade effects. This risk is measured by losses to the financial system that may result via the OTC derivative contracts from the default of one or more banks or primary broker-dealers. We then stress the importance of "netting" within the OTC derivative contracts. Our methodology shows that, even using data from before the worsening of the crisis in late Summer 2008, the potential cascade effects could be very substantial. We summarize our results in the context of the stability of the banking system and provide some policy measures that could be usefully considered by the regulators in their discussions of current issues.
Book Synopsis Counterparty Risk in the Over-the-counter Derivatives Market by : Miguel A. Segoviano
Download or read book Counterparty Risk in the Over-the-counter Derivatives Market written by Miguel A. Segoviano and published by . This book was released on 2008 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment Publisher : ISBN 13 : Total Pages :172 pages Book Rating :4.3/5 (91 download)
Book Synopsis Reducing Risks and Improving Oversight in the OTC Credit Derivatives Market by : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment
Download or read book Reducing Risks and Improving Oversight in the OTC Credit Derivatives Market written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment and published by . This book was released on 2010 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Collateral, Netting and Systemic Risk in the OTC Derivatives Market by : Mr.Manmohan Singh
Download or read book Collateral, Netting and Systemic Risk in the OTC Derivatives Market written by Mr.Manmohan Singh and published by International Monetary Fund. This book was released on 2010-04-01 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.
Book Synopsis Counterparty Risk in the Over-the-counter Derivates Market by : Miguel A. Segoviano
Download or read book Counterparty Risk in the Over-the-counter Derivates Market written by Miguel A. Segoviano and published by . This book was released on 2008 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial market turmoil of recent months has highlighted the importance of counterparty risk. Here, we discuss counterparty risk that may stem from the OTC derivatives markets and attempt to assess the scope of potential cascade effects. This risk is measured by losses to the financial system that may result via the OTC derivative contracts from the default of one or more banks or primary broker-dealers. We then stress the importance of "netting" within the OTC derivative contracts. Our methodology shows that, even using data from before the worsening of the crisis in late Summer 2008, the potential cascade effects could be very substantial. We summarize our results in the context of the stability of the banking system and provide some policy measures that could be usefully considered by the regulators in their discussions of current issues.
Book Synopsis Discriminatory Pricing of Over-the-Counter Derivatives by : Hau Harald
Download or read book Discriminatory Pricing of Over-the-Counter Derivatives written by Hau Harald and published by International Monetary Fund. This book was released on 2019-05-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: New regulatory data reveal extensive price discrimination against non-financial clients in the FX derivatives market. The client at the 90th percentile pays an effective spread of 0.5%, while the bottom quarter incur transaction costs of less than 0.02%. Consistent with models of search frictions in over-the-counter markets, dealers charge higher spreads to less sophisticated clients. However, price discrimination is eliminated when clients trade through multi-dealer request-for-quote platforms. We also document that dealers extract rents from captive clients and market opacity, but only for contracts negotiated bilaterally with unsophisticated clients.
Book Synopsis Post-Trade Processing of OTC Derivatives by : Olga Lewandowska
Download or read book Post-Trade Processing of OTC Derivatives written by Olga Lewandowska and published by BoD – Books on Demand. This book was released on 2020-04-30 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial crisis of 2007–2009 exposed the weaknesses of the global over-the-counter (OTC) derivatives market such as limited transparency regarding risk exposures, poor counterparty risk management practices, and the risk of contagion arising from interconnectedness in this market. In the aftermath of the financial crisis, regulators introduced worldwide legislative and regulatory changes aimed at increasing the transparency and stability of the financial markets. In this book, Dr. Olga Lewandowska explores those novel regulatory solutions and their impact. The main focus is on central counterparty (CCP) clearing that became mandatory for OTC derivatives under the new regulatory paradigm. In four research papers, she analyzes CCP from different risk perspectives and based on four diverse research methods. Her book offers a comprehensive assessment of the risk-reduction potential of the CCPs, their implications for the financial markets, and the practical challenges in the implementation of the recent financial market reforms.
Book Synopsis IMF Working Papers by : Segoviano Basurto
Download or read book IMF Working Papers written by Segoviano Basurto and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Counterparty Credit Risk by : Jon Gregory
Download or read book Counterparty Credit Risk written by Jon Gregory and published by John Wiley & Sons. This book was released on 2010-01-26 with total page 449 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first decade of the 21st Century has been disastrous for financial institutions, derivatives and risk management. Counterparty credit risk has become the key element of financial risk management, highlighted by the bankruptcy of the investment bank Lehman Brothers and failure of other high profile institutions such as Bear Sterns, AIG, Fannie Mae and Freddie Mac. The sudden realisation of extensive counterparty risks has severely compromised the health of global financial markets. Counterparty risk is now a key problem for all financial institutions. This book explains the emergence of counterparty risk during the recent credit crisis. The quantification of firm-wide credit exposure for trading desks and businesses is discussed alongside risk mitigation methods such as netting and collateral management (margining). Banks and other financial institutions have been recently developing their capabilities for pricing counterparty risk and these elements are considered in detail via a characterisation of credit value adjustment (CVA). The implications of an institution valuing their own default via debt value adjustment (DVA) are also considered at length. Hedging aspects, together with the associated instruments such as credit defaults swaps (CDSs) and contingent CDS (CCDS) are described in full. A key feature of the credit crisis has been the realisation of wrong-way risks illustrated by the failure of monoline insurance companies. Wrong-way counterparty risks are addressed in detail in relation to interest rate, foreign exchange, commodity and, in particular, credit derivative products. Portfolio counterparty risk is covered, together with the regulatory aspects as defined by the Basel II capital requirements. The management of counterparty risk within an institution is also discussed in detail. Finally, the design and benefits of central clearing, a recent development to attempt to control the rapid growth of counterparty risk, is considered. This book is unique in being practically focused but also covering the more technical aspects. It is an invaluable complete reference guide for any market practitioner with any responsibility or interest within the area of counterparty credit risk.
Book Synopsis Recommendations for Central Counterparties by : Group of Ten. Committee on Payment and Settlement Systems
Download or read book Recommendations for Central Counterparties written by Group of Ten. Committee on Payment and Settlement Systems and published by . This book was released on 2004 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Derivative Market Competition by : Mr.Jens Nystedt
Download or read book Derivative Market Competition written by Mr.Jens Nystedt and published by International Monetary Fund. This book was released on 2004-04-01 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent regulatory initiatives in the United States have again raised the issue of a 'level regulatory and supervisory playing field' and the degree of competition globally between over-the-counter (OTC) derivatives and organized derivative exchange (ODE) markets. This paper models some important aspects of how an ODE market interrelates with the OTC markets. It analyzes various ways in which an ODE market can respond to competition from the OTC markets and considers whether ODE markets would actually benefit from a more level playing field. Among other factors, such as different transaction costs, different abilities to mitigate credit risk play a significant role in determining the degree of competition between the two types of markets. This implies that a potentially important service ODE markets can provide OTC market participants is to extend clearing services to them. Such services would allow the OTC markets to focus more on providing less competitive contracts/innovations and instead customize its contracts to specific investors' risk preferences and needs.
Author :United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises Publisher : ISBN 13 : Total Pages :216 pages Book Rating :4.:/5 (327 download)
Book Synopsis The Effective Regulation of the Over-the-counter Derivatives Market by : United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises
Download or read book The Effective Regulation of the Over-the-counter Derivatives Market written by United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises and published by . This book was released on 2009 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment Publisher : ISBN 13 : Total Pages :196 pages Book Rating :4.:/5 (327 download)
Book Synopsis Over-the-counter Derivatives by : United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment
Download or read book Over-the-counter Derivatives written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment and published by . This book was released on 2010 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Measuring Counterparty Credit Risk by : Samuel Jacques Le Roux
Download or read book Measuring Counterparty Credit Risk written by Samuel Jacques Le Roux and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The global over-the-counter derivatives market reached a staggering 14.5 trillion US dollars in gross market value at the end of December 2007. Although OTC derivatives are extremely useful and versatile in transferring risks, it appears to be a double-edged sword. For every derivative transaction concluded in the OTC market, there are two parties involved each of which is exposed to the other defaulting on the agreed terms and conditions of the contract. Counterparty credit risk is defined as the loss that will be incurred in the event that a counterparty fails to honour its financial obligations. This dissertation provides an overview of counterparty credit risk measurement from a theoretical point of view and puts an emphasis on the demonstration of the current solutions used in practice to address this problem. The author applies a bottom up approach to the problem by defining counterparty credit risk exposure on a contract (single-trade) level and expands this definition on a step-by-step basis to incorporate portfolio effects, such as correlation among underlying market variables as well as credit risk mitigation techniques, such as netting and collateral agreements, in measuring counterparty credit risk exposure on a counterparty level. The author also discusses related concepts which impact counterparty credit risk such as wrong-way risk and proposes an enhancement to the framework introduced by Finger (2000) for incorporating wrong-way risk into existing measures of counterparty credit risk exposure. Finger's framework is enhanced by the introduction of a structural model approach which can be used in establishing a functional and intuitive relationship between the probability of default of the counterparty and the underlying market variable to the derivative contract under consideration. This approach is also applied to a typical South African situation through the use of Monte Carlo simulation. The topic of counterparty credit risk modelling is a very relevant topic in modern finance, especially since the advent of Basel 2 which this dissertation also touches on in terms of the applications of counterparty credit risk modelling and how this relates to the minimum regulatory capital requirements set by bank regulators. Copyright.
Book Synopsis Central Counterparties by : Jon Gregory
Download or read book Central Counterparties written by Jon Gregory and published by John Wiley & Sons. This book was released on 2014-06-17 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: Practical guidance toward handling the latest changes to the OTC derivatives market Central Counterparties is a practical guide to central clearing and bilateral margin requirements, from one of the industry's most influential credit practitioners. With up-to-date information on the latest regulations imposed after the global financial crisis, this book covers the mechanics of the clearing process and analyses the resulting consequences. Detailed discussion explains the ways in which the very significant clearing and margining rules will affect the OTC derivatives market and the financial markets in general, with practical guidance toward implementation and how to handle the potential consequences. Over-the-counter derivatives were blamed by many for playing a major role in the 2007 financial crisis, resulting in a significant attention and dramatic action by policymakers, politicians, and regulators to reduce counterparty credit risk which was seen as a major issue in the crisis. The two most important regulatory changes are the mandatory clearing of standardised OTC derivatives, and the requirements for bilateral margin posting in non-standard OTC contracts. Central Counterparties is a complete reference guide to navigating these changes, providing clarification and practical advice. Review the mitigation of counterparty credit risk with the historical development of central clearing Clarify the latest regulatory requirements imposed by Dodd-Frank, EMIR, Basel III and more Learn the mechanics of central clearing, with special attention to complex issues such as margin calculations, the loss waterfall, client clearing and regulatory capital rules Gain insight into the advantages and disadvantages of clearing and bilateral margin requirements, and the potential issues that arise As the clearing and margining mandates are phased in, the associated costs will be severe enough to dramatically shift the topology of the financial markets and transform the nature of risk. Central Counterparties provides the information, clarification and expert insight market practitioners need to get up to speed quickly.
Book Synopsis OTC Markets in Derivative Instruments by : Nick Cavalla
Download or read book OTC Markets in Derivative Instruments written by Nick Cavalla and published by Springer. This book was released on 2016-07-27 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt: To date, most academic and practical texts have concentrated on the exchange-traded markets and focused on the nature and price characteristics of the various listed instruments. By contrast, OTC Markets in Derivative Instruments deals in detail with the complexities of the over-the-counter markets - extending a description of the core products to a discussion of real world applications and risks. Regulatory, accounting and tax issues are also covered. Contributors include Bankers Trust, BZW, GNI, Goldman Sachs, J.P. Morgan, Natwest Futures, Midland Montagu and Mitsubishi.
Book Synopsis Post-Trade Processing of OTC Derivatives by : Olga Lewandowska
Download or read book Post-Trade Processing of OTC Derivatives written by Olga Lewandowska and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
