Comparing the pre-settlement risk implications of alternative clearing arrangements
By: John P. Jackson and Mark J. Manning.
Contributors: Manning, Mark J.; Bank of England.
Series: Working paper -- no. 321; Working paper (Bank of England : Online) -- no. 321.
Publisher: Bank of England
Published: 2007
Place of publication: London
Language: eng
Format: Electronic resource
Description: "In recent years, there has been a marked expansion in the range of products cleared through  central counterparty clearing houses, accompanied by a trend towards consolidation in the  clearing infrastructure. The financial stability implications of these developments are of  considerable policy interest. In this paper, we use a simulation approach to analyse, in a  systematic way, the potential pre-settlement cost and risk implications of these developments.  Our results point towards substantial risk-reduction benefits from multilateral clearing  arrangements, arising from multilateral netting and mutualisation. The paper also examines  individual incentives to join multilateral clearing arrangements. We suggest that arrangements  with restricted direct participation and tiered membership may be a natural response to the  uneven distribution of total pre-settlement costs when agents are of heterogeneous credit quality  and it is costly to individually tailor margin."--Bank of England web site.
Notes: Title from PDF file as viewed on Oct. 22, 2007.

Includes bibliographical references.

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