Collateral, Netting and Systemic Risk in the OTC Derivatives Market / Manmohan Singh.

Format:

Book

Government document

Author/Creator:

Singh, Manmohan.

Contributor:

International Monetary Fund. International Capital Markets Dept.

Series:

IMF Working Papers; Working Paper ; No. 2010/099

IMF Working Papers

Language:

English

Subjects (All):

Derivative securities.

Over-the-counter markets.

Credit--Management.

Credit.

Physical Description:

1 online resource (33 p.)

Place of Publication:

Washington, D.C. : International Monetary Fund, 2010.

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.

Contents:

Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Collateral, Netting and Moving to CCPs; 1. Derivative Payables (After Netting); 2. Derivative Receivables and Derivative Payables after Netting; III. Capitalization Needs for Moving to CCPs; 1. Some Arithmetic on Collateral Requirements at CCPs; 1. Present Central Counterparties in Business (or Seeking New Business); IV. Concluding Remarks and Policy Issues for Regulators to Consider; I. Objective of a Large Bank to Minimize Costs of Moving to CCPs; References; Footnotes

Notes:

"March 2010."

Includes bibliographical references (p. 14).

Description based on print version record.

ISBN:

9786612845895

9781462320431

1462320430

9781452756097

1452756090

9781282845893

1282845896

9781451982763

1451982763

OCLC:

867926789