Central counterparties and the topology of clearing networks

Working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 16 August 2013

Working Paper No. 480
By Marco Galbiati and Kimmo Soramäki

Given a network of client-clearer relationships, we define central clearing as a function transforming bilateral trading exposures into centrally cleared exposures. By using numerical simulations, we study how this function is affected by the network's topology, focusing on the exposures of the central counterparty. By assuming that margin requirements are a linear function of exposures, we also draw conclusions as to how the network topology affects aggregate margin requirements.

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