Franklin

Collateral, Netting and Systemic Risk in the OTC Derivatives Market [electronic resource] Singh, Manmohan.

Author/Creator:
Singh, Manmohan.
Publication:
Washington, D.C. : International Monetary Fund, 2010.
Series:
IMF eLibrary
IMF Working Papers; Working Paper No. 10/99.
IMF Working Papers; Working Paper No. 10/99
Format/Description:
Government document
Book
1 online resource (15 p.)
Local subjects:
Asset management. (search)
Banks. (search)
Capital. (search)
Corporation and Securities Law. (search)
Credit derivatives. (search)
Credit markets. (search)
Credit risk. (search)
Credit risks. (search)
Derivative. (search)
Derivative contract. (search)
Derivative contracts. (search)
Derivative market. (search)
Derivative products. (search)
Derivatives market. (search)
Derivatives market activity. (search)
Financial institutions. (search)
Financial instruments. (search)
Financial markets. (search)
Financial regulation. (search)
Financial risk. (search)
Financial services. (search)
Financial statements. (search)
Financial system. (search)
Government Policy and Regulation. (search)
Guarantee funds. (search)
Hedge. (search)
Hedge fund. (search)
Hedge funds. (search)
International Financial Markets. (search)
International Monetary Arrangements and Institutions. (search)
Margin requirements. (search)
Moral hazard. (search)
Mortgages. (search)
Other Depository Institutions. (search)
Securities regulations. (search)
Tax rate. (search)
United States. (search)
Summary:
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.
Notes:
Description based on print version record.
Contributor:
Singh, Manmohan.
Other format:
Print Version:
ISBN:
1451982763:
9781451982763
ISSN:
1018-5941
Publisher Number:
10.5089/9781451982763.001
Access Restriction:
Restricted for use by site license.
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