Systemic Risk in Real Time: A Risk Dashboard for Central Clearing Parties (CCPs)

39 Pages Posted: 16 Dec 2016

See all articles by Wenqian Huang

Wenqian Huang

Bank for International Settlements

Albert J. Menkveld

VU Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: December 16, 2016

Abstract

Time is valuable, in particular in stressed markets. As central clearing parties (CCPs) have become systemically important institutions, it is desirable to track their exposure towards clearing members in real time. We propose a risk dashboard that not only tracks such exposure, but also offers a decomposition. This enables a CCP to be alerted by sudden large increases, but also to identify their root causes. When implementing the approach on real-world data we find fat tails. Zooming in on extreme increases, we find that they are disproportionately due to crowded trades among intermediaries — desirable if motivated by hedging, worrying if due to speculation.

Keywords: CCP, exposure, systemic risk, real-time

JEL Classification: G10

Suggested Citation

Huang, Wenqian and Menkveld, Albert J., Systemic Risk in Real Time: A Risk Dashboard for Central Clearing Parties (CCPs) (December 16, 2016). Available at SSRN: https://ssrn.com/abstract=2886167 or http://dx.doi.org/10.2139/ssrn.2886167

Wenqian Huang

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://wenqianhuang.org

Albert J. Menkveld (Contact Author)

VU Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands
+31 20 5986130 (Phone)
+31 20 5986020 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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