The Economics of Central Clearing

Annual Review of Financial Economics (, Forthcoming).

28 Pages Posted: 8 Dec 2020

See all articles by Albert J. Menkveld

Albert J. Menkveld

Vrije Universiteit Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR)

Guillaume Vuillemey

HEC Paris

Multiple version iconThere are 2 versions of this paper

Date Written: November 24, 2020


Central clearing counterparties (CCPs) have a variety of economic rationales. The Great Recession of 2007-2009 led regulators to mandate CCPs for most interest-rate and credit derivatives, markets in which large amounts of risks are transferred across agents. This change led to a large increase in CCP studies which, along with classical studies, are surveyed in this article. Discussed are, for example, multilateral netting, the insurance against counterparty risk, the effect of CCPs on asset prices and fire sales, margins setting, the default waterfall, and CCP governance. We review both CCP theory and empirics, and conclude by discussing regulatory issues.

Keywords: Central clearing, Counterparty risk, Margin, Default waterfall, Systemic risk

JEL Classification: G1, G2, G3

Suggested Citation

Menkveld, Albert J. and Vuillemey, Guillaume, The Economics of Central Clearing (November 24, 2020). Annual Review of Financial Economics (, Forthcoming)., Available at SSRN:

Albert J. Menkveld (Contact Author)

Vrije Universiteit Amsterdam ( email )

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

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Guillaume Vuillemey

HEC Paris ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351

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