Collateral, Netting and Systemic Risk in the OTC Derivatives Market PDF Download

Author: Mr.Manmohan Singh
Publisher: International Monetary Fund
ISBN: 1451982763
Category : Business & Economics
Languages : en
Pages : 17

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Book Description
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.

Author: Benjamin Lee
Publisher: Duke University Press
ISBN: 0822386127
Category : Business & Economics
Languages : en
Pages : 225

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Book Description
The market for financial derivatives is far and away the largest and most powerful market in the world, and it is growing exponentially. In 1970 the yearly valuation of financial derivatives was only a few million dollars. By 1980 the sum had swollen to nearly one hundred million dollars. By 1990 it had climbed to almost one hundred billion dollars, and in 2000 it approached one hundred trillion. Created and sustained by a small number of European and American banks, corporations, and hedge funds, the derivatives market has an enormous impact on the economies of nations—particularly poorer nations—because it controls the price of money. Derivatives bought and sold by means of computer keystrokes in London and New York affect the price of food, clothing, and housing in Johannesburg, Kuala Lumpur, and Buenos Aires. Arguing that social theorists concerned with globalization must familiarize themselves with the mechanisms of a world economy based on the rapid circulation of capital, Edward LiPuma and Benjamin Lee offer a concise introduction to financial derivatives. LiPuma and Lee explain how derivatives are essentially wagers—often on the fluctuations of national currencies—based on models that aggregate and price risk. They describe how these financial instruments are changing the face of capitalism, undermining the power of nations and perpetrating a new and less visible form of domination on postcolonial societies. As they ask: How does one know about, let alone demonstrate against, an unlisted, virtual, offshore corporation that operates in an unregulated electronic space using a secret proprietary trading strategy to buy and sell arcane financial instruments? LiPuma and Lee provide a necessary look at the obscure but consequential role of financial derivatives in the global economy.

Author: Markus Brunnermeier
Publisher: University of Chicago Press
ISBN: 022609264X
Category : Business & Economics
Languages : en
Pages : 286

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Book Description
The recent financial crisis and the difficulty of using mainstream macroeconomic models to accurately monitor and assess systemic risk have stimulated new analyses of how we measure economic activity and the development of more sophisticated models in which the financial sector plays a greater role. Markus Brunnermeier and Arvind Krishnamurthy have assembled contributions from leading academic researchers, central bankers, and other financial-market experts to explore the possibilities for advancing macroeconomic modeling in order to achieve more accurate economic measurement. Essays in this volume focus on the development of models capable of highlighting the vulnerabilities that leave the economy susceptible to adverse feedback loops and liquidity spirals. While these types of vulnerabilities have often been identified, they have not been consistently measured. In a financial world of increasing complexity and uncertainty, this volume is an invaluable resource for policymakers working to improve current measurement systems and for academics concerned with conceptualizing effective measurement.

Author: Douglas W. Arner
Publisher: Cigi Press
ISBN: 9781928096887
Category : Economic policy
Languages : en
Pages : 0

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Book Description
The 2008 global financial crisis brought the world's economy closer to collapse than ever before. Has enough been done to prevent another crisis?

Author: Douglas Darrell Evanoff
Publisher: World Scientific
ISBN: 9812833382
Category : Business & Economics
Languages : en
Pages : 455

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Book Description
The impact of globalization of financial markets is a highly debated topic, particularly in recent months when the issue of globalization and contagion of financial distress has become a focus of intense policy debate. The papers in this volume provide an up-to-date overview of the key issues in this debate. While most of the contributions were prepared after the initial outbreak of the current global turmoil and financial crisis, they identify the relative strengths of the risk diversification and risk transmission processes and examine the empirical evidence to date. The book considers the relative roles of banks, nonbank financial institutions and capital markets in both risk diversification and risk transmission. It then evaluates the current status of crisis resolution in a global context, and speculates where to go from here in terms of understanding, resolution, prevention and public policy.

Author: Joseph G. Haubrich
Publisher: University of Chicago Press
ISBN: 0226319288
Category : Business & Economics
Languages : en
Pages : 286

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Book Description
In the aftermath of the recent financial crisis, the federal government has pursued significant regulatory reforms, including proposals to measure and monitor systemic risk. However, there is much debate about how this might be accomplished quantitatively and objectively—or whether this is even possible. A key issue is determining the appropriate trade-offs between risk and reward from a policy and social welfare perspective given the potential negative impact of crises. One of the first books to address the challenges of measuring statistical risk from a system-wide persepective, Quantifying Systemic Risk looks at the means of measuring systemic risk and explores alternative approaches. Among the topics discussed are the challenges of tying regulations to specific quantitative measures, the effects of learning and adaptation on the evolution of the market, and the distinction between the shocks that start a crisis and the mechanisms that enable it to grow.

Author: Ms.Sheri M. Markose
Publisher: International Monetary Fund
ISBN: 1475531869
Category : Business & Economics
Languages : en
Pages : 58

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Book Description
Financial network analysis is used to provide firm level bottom-up holistic visualizations of interconnections of financial obligations in global OTC derivatives markets. This helps to identify Systemically Important Financial Intermediaries (SIFIs), analyse the nature of contagion propagation, and also monitor and design ways of increasing robustness in the network. Based on 2009 FDIC and individually collected firm level data covering gross notional, gross positive (negative) fair value and the netted derivatives assets and liabilities for 202 financial firms which includes 20 SIFIs, the bilateral flows are empirically calibrated to reflect data-based constraints. This produces a tiered network with a distinct highly clustered central core of 12 SIFIs that account for 78 percent of all bilateral exposures and a large number of financial intermediaries (FIs) on the periphery. The topology of the network results in the “Too- Interconnected-To-Fail” (TITF) phenomenon in that the failure of any member of the central tier will bring down other members with the contagion coming to an abrupt end when the ‘super-spreaders’ have demised. As these SIFIs account for the bulk of capital in the system, ipso facto no bank among the top tier can be allowed to fail, highlighting the untenable implicit socialized guarantees needed for these markets to operate at their current levels. Systemic risk costs of highly connected SIFIs nodes are not priced into their holding of capital or collateral. An eigenvector centrality based ‘super-spreader’ tax has been designed and tested for its capacity to reduce the potential socialized losses from failure of SIFIs.

Author: Kern Alexander
Publisher: Oxford University Press
ISBN: 0195166981
Category : Business & Economics
Languages : en
Pages : 329

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Book Description
The book sets forth the economic rationale for international financial regulation and what role, if any, international regulation can play in effectively managing systemic risk while providing accountability to all affected nations. The book suggests that a particular type of global governance structure is necessary to have more efficient regulation of the international financial system.

Author: Myron S. Scholes
Publisher:
ISBN: 9781292065571
Category :
Languages : en
Pages : 528

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Book Description
For MBA students and graduates embarking on careers in investment banking, corporate finance, strategy consulting, money management, or venture capital Through integration with traditional MBA topics, Taxes and Business Strategy, Fifth Edition provides a framework for understanding how taxes affect decision-making, asset prices, equilibrium returns, and the financial and operational structure of firms. Teaching and Learning Experience This program presents a better teaching and learning experience-for you and your students: *Use a text from an active author team: All 5 authors actively teach the tax and business strategy course and provide students with relevant examples from both classroom and real-world consulting experience. *Teach students the practical uses for business strategy: Students learn important concepts that can be applied to their own lives. *Reinforce learning by using in-depth analysis: Analysis and explanatory material help students understand, think about, and retain information.

Author: Mr.Andreas A. Jobst
Publisher: International Monetary Fund
ISBN: 1475557531
Category : Business & Economics
Languages : en
Pages : 93

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Book Description
The recent global financial crisis has forced a re-examination of risk transmission in the financial sector and how it affects financial stability. Current macroprudential policy and surveillance (MPS) efforts are aimed establishing a regulatory framework that helps mitigate the risk from systemic linkages with a view towards enhancing the resilience of the financial sector. This paper presents a forward-looking framework ("Systemic CCA") to measure systemic solvency risk based on market-implied expected losses of financial institutions with practical applications for the financial sector risk management and the system-wide capital assessment in top-down stress testing. The suggested approach uses advanced contingent claims analysis (CCA) to generate aggregate estimates of the joint default risk of multiple institutions as a conditional tail expectation using multivariate extreme value theory (EVT). In addition, the framework also helps quantify the individual contributions to systemic risk and contingent liabilities of the financial sector during times of stress.