Risk capital allocation for a guarantee fund in a central counterparty clearing house

  • Javier Clavijo Javier Clavijo

Central Counterparty Clearing Houses (CCPs) are institutions of great importance for the stability of the organized financial markets. The construction of an adequate guarantee system is vital for the confidence of its participants. One of the most common features for reinforcing the guarantee system is the implementation of a guarantee fund that protects the CCP against events of default in stressed scenarios. This master thesis studies the design of these guarantee funds, considering alternatives for measuring the risks of the CCP, and concentrating the study on the Risk Allocation Problem that arises when the CCP must require from the participants of the markets a contribution for filling the fund. Several Allocation Rules discussed in the literature are considered and implemented. An additional Allocation Rule is proposed based on the concepts of fair expected transfers among the participants in the fund. A comparison of the results of different allocation rules is provided.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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