Derivatives Clearing, Default Risk, and Insurance

Journal of Risk and Insurance - Tập 80 Số 2 - Trang 373-400 - 2013
Richard A. Jones1, Christophe Hurlin2
1Simon Fraser University
2Groupement de Recherche et d'Etudes en Gestion à HEC

Tóm tắt

AbstractUsing daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members. We find that the major source of default risk for a clearing member is proprietary trading rather than trading by customers. Additionally, we show that extreme losses suffered by important clearing firms tend to cluster, which raises systemic risk concerns. Finally, we discuss how private insurance could be used to cover the loss from defaults by clearing members.

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