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Risk Mutualization in Central Clearing: An Answer to the Cross-Guarantee Phenomenon from the Financial Stability Viewpoint
2021
Risks
Central counterparties' (CCPs) role is to take over the counterparty risk during trading. To fulfill its role, a CCP needs to operate a multi-level guarantee system that can absorb losses of clearing members' defaults. Our main question is how the size of the guarantee system changes and how the cross-guarantee undertaking changes between clearing members and markets if the CCP merges the guarantee systems of different markets. This question is essential from a financial stability perspective
doi:10.3390/risks9080148
fatcat:t4tscrzqxrg7jgdlrf4kn5krda