Some thoughts displayed at my office . Credits:- Shraddha Borole & Rinal Shrimankar for helping and putting up the great show.
The Bank of England has released two papers on CCPs, which explain loss–allocation rules, and how to balance the costs of default resources with the expected losses.
Paper 19, titled: “Central counterparties and their financial resources—a numerical approach”, maintains that new regulatory standards have required central counterparties to have robust processes in place to mitigate their counterparty credit risk exposures.
“At the same time, the standards allow CCPs to tailor their risk management models. This paper considers how CCPs can optimally determine the relative mix of initial margin and default fund contributions in a stylised setting, by balancing the costs of default resources with the expected losses they protect against,” . Continue reading “Central Counterparty Clearing (CCP) some thoughts from Bank of Englnad”