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Clearinghouse Default Resources : = Theory and Empirical Analysis.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Clearinghouse Default Resources :/
Reminder of title:	Theory and Empirical Analysis.
Author:	Cheng, Wan-Schwin Allen.
Description:	1 online resource (254 pages)
Notes:	Source: Dissertation Abstracts International, Volume: 79-04(E), Section: A.
Contained By:	Dissertation Abstracts International79-04A(E).
Subject:	Finance. -
Online resource:	click for full text (PQDT)
ISBN:	9780355351477

Clearinghouse Default Resources : = Theory and Empirical Analysis.
Cheng, Wan-Schwin Allen.

Clearinghouse Default Resources :Theory and Empirical Analysis. - 1 online resource (254 pages)

Source: Dissertation Abstracts International, Volume: 79-04(E), Section: A.

Thesis (Ph.D.)

Includes bibliographical references

Clearinghouses insure trades. Acting as a central counterparty (CCP), clearinghouses consolidate financial exposures across multiple institutions, aiding the efficient management of counterparty credit risk. In this thesis, we study the decision problem faced by for-profit clearinghouses, focusing on primary economic incentives driving their determination of layers of loss-absorbing capital. The clearinghouse's loss-allocation mechanism, referred to as the default waterfall, governs the allocation and management of counterparty risk. This stock of loss-absorbing capital typically consists of initial margins, default funds, and the clearinghouse's contributed equity.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2018

Mode of access: World Wide Web

ISBN: 9780355351477Subjects--Topical Terms:

559073
Finance.
Index Terms--Genre/Form:

554714
Electronic books.

Clearinghouse Default Resources : = Theory and Empirical Analysis.
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245 1 0 $a Clearinghouse Default Resources : $b Theory and Empirical Analysis.
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500 $a Source: Dissertation Abstracts International, Volume: 79-04(E), Section: A.
500 $a Adviser: Agostino Capponi.
502 $a Thesis (Ph.D.) $c Columbia University $d 2017.
504 $a Includes bibliographical references
520 $a Clearinghouses insure trades. Acting as a central counterparty (CCP), clearinghouses consolidate financial exposures across multiple institutions, aiding the efficient management of counterparty credit risk. In this thesis, we study the decision problem faced by for-profit clearinghouses, focusing on primary economic incentives driving their determination of layers of loss-absorbing capital. The clearinghouse's loss-allocation mechanism, referred to as the default waterfall, governs the allocation and management of counterparty risk. This stock of loss-absorbing capital typically consists of initial margins, default funds, and the clearinghouse's contributed equity.
520 $a We separate the overall decision problem into two distinct subproblems and study them individually. The first is the clearinghouse's choice of initial margin and clearing fee requirements, and the second involves its choice of resources further down the waterfall, namely the default funds and clearinghouse equity. We solve for the clearinghouse's equilibrium choices in both cases explicitly, and address the different economic roles they play in the clearinghouse's profit-maximization process.
520 $a The models presented in this thesis show, without exception, that clearinghouse choices should depend not only on the riskiness of the cleared position but also on market and participants' characteristics such as default probabilities, fundamental value, and funding opportunity cost.
520 $a Our results have important policy implications. For instance, we predict a counteracting force that dampens monetary easing enacted via low interest rate policies. When funding opportunity costs are low, our research shows that clearinghouses employ highly conservative margin and default funds, which tie up capital and credit. This is supported by the low interest rate environment following the financial crisis of 2007--08. In addition to low productivity growth and return on capital, major banks have chosen to accumulate large cash piles on their balance sheets rather than increase lending. In terms of systemic risk, our empirical work, joint with the U.S. Commodity Futures Trading Commission (CFTC), points to the possibility of destabilizing loss and margin spirals: in the terminology of Brunnermeier and Pedersen (2009), we argue that a major clearinghouse's behavior is consistent with that of an uninformed financier and that common shocks to credit quality can lead to tightening margin constraints.
533 $a Electronic reproduction. $b Ann Arbor, Mich. : $c ProQuest, $d 2018
538 $a Mode of access: World Wide Web
650 4 $a Finance. $3 559073
650 4 $a Operations research. $3 573517
655 7 $a Electronic books. $2 local $3 554714
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690 $a 0796
710 2 $a ProQuest Information and Learning Co. $3 1178819
710 2 $a Columbia University. $b Operations Research. $3 1179493
773 0 $t Dissertation Abstracts International $g 79-04A(E).
856 4 0 $u http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=10635942 $z click for full text (PQDT)