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Digital Library

of the European Council for Modelling and Simulation

 

Title:

Clearinghouses Versus Central Counterparties From Margin Calculation Point Of View

Authors:

Melinda Friesz, Kata Varadi

Published in:

 

 

(2021). ECMS 2021, 35th Proceedings
Edited by: Khalid Al-Begain, Mauro Iacono, Lelio Campanile, Andrzej Bargiela, European Council for Modelling and Simulation.

 

DOI: http://doi.org/10.7148/2021

ISSN: 2522-2422 (ONLINE)

ISSN: 2522-2414 (PRINT)

ISSN: 2522-2430 (CD-ROM)

 

ISBN: 978-3-937436-72-2
ISBN: 978-3-937436-73-9(CD)

 

Communications of the ECMS , Volume 35, Issue 1, June 2021,

United Kingdom

 

Citation format:

Melinda Friesz, Kata Varadi (2021). Clearinghouses Versus Central Counterparties From Margin Calculation Point Of View, ECMS 2021 Proceedings Edited By: Khalid Al-Begain, Mauro Iacono, Lelio Campanile, Andrzej Bargiela European Council for Modeling and Simulation. doi: 10.7148/2021-0075

DOI:

https://doi.org/10.7148/2021-0075

Abstract:

Clearinghouses and central counterparties (CCPs) have a notable role in financial markets, namely facilitating securities trading and derivative transactions on exchanges and over-the-counter markets. They have to clear the transactions and carry out their settlements to decrease costs and settlement risk. To efficiently carry out this activity, they need to collect adequate collateral from the trading parties as guarantees. Two main elements of these guarantees are the margin requirement and default fund contribution. Our paper focuses on the margin calculations and emphasizes their notable difference in the case of clearinghouses and CCPs. Our main result is that clearinghouses’ margin requirement is better from a procyclicality point of view; however, CCP margining is more prudent based on our results.

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