Financial Stability Paper No. 26
By Fergus Cumming and Joseph Noss
This paper proposes a methodology whereby daily data on a CCP’s member exposures may be used to form a ‘top-down’ statistical model of the risk arising from CCPs’ exposures to their members. In doing so, it may offer a tool with which CCPs, their members and their regulators, could assess the adequacy of CCPs’ total default resources and quantify the trade-off that occurs in the balance of resources between initial margin and default funds. It may also provide a technique to estimate the relative risk borne by clearing members on their CCP default fund contributions.