Clearing Risks in OTC Derivatives Markets: The CCP-Bank Nexus

18 Pages Posted: 29 Jan 2019

See all articles by Umar Faruqui

Umar Faruqui

Bank for International Settlements (BIS)

Wenqian Huang

Bank for International Settlements

Előd Takáts

Bank for International Settlements (BIS)

Date Written: December 1, 2018

Abstract

Systemically important banks and central counterparties (CCPs) interact in highly concentrated over-the-counter (OTC) derivatives markets. We outline the CCP-bank nexus to think about the endogenous interactions between banks and CCPs in periods of stress. As these interactions could potentially lead to destabilising feedback loops, the risks of banks and CCPs should be considered jointly, rather than in isolation.

JEL Classification: G01, G18, G21, G23

Suggested Citation

Faruqui, Umar and Huang, Wenqian and Takáts, Előd, Clearing Risks in OTC Derivatives Markets: The CCP-Bank Nexus (December 1, 2018). BIS Quarterly Review December 2018, Available at SSRN: https://ssrn.com/abstract=3316367

Umar Faruqui (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Wenqian Huang

Bank for International Settlements ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://wenqianhuang.org

Előd Takáts

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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