Over-the-counter Derivatives and Systemic Risk to the Global Financial System - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Over-the-counter Derivatives and Systemic Risk to the Global Financial System write by Michael R. Darby. This book was released on 1994. Over-the-counter Derivatives and Systemic Risk to the Global Financial System available in PDF, EPUB and Kindle. Over the last decade dealing in derivative financial instruments (basically forwards, futures, options and combinations of these), particularly in the over-the-counter (OTC) derivatives market has become a central activity for major wholesale banks and financial institutions. Measured in terms of notional principal amount, OTC derivatives outstanding are near, if not greater than, US$10 trillion, even after deduction of double-counting for intra-dealer transactions. Major new regulatory initiatives, including proposed new capital requirements, are under consideration as a means of reducing systemic risk. This paper examines the concept of systemic risk -- that failure of one firm will lead to the failure of a large number of other firms or indeed the collapse of the international financial system. Alternative proposed definitions are considered and integrated and the effects of OTC derivatives on these risks discussed. The key conclusion is that systemic risk has been reduced by the development of the OTC derivatives market due to shifting economic risks to those better able either to bear the risk or, in many cases, cancel it against offsetting risks. The implications of the Basle II capital proposals for systemic risk are analyzed and shown to increase this risk due to encouraging transactions which increase portfolio risks of the dealers and discouraging transactions which decrease their portfolio risk.
Collateral, Netting and Systemic Risk in the OTC Derivatives Market
Collateral, Netting and Systemic Risk in the OTC Derivatives Market - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Collateral, Netting and Systemic Risk in the OTC Derivatives Market write by Mr.Manmohan Singh. This book was released on 2010-04-01. Collateral, Netting and Systemic Risk in the OTC Derivatives Market available in PDF, EPUB and Kindle. To mitigate systemic risk, some regulators have advocated the greater use of centralized counterparties (CCPs) to clear Over-The-Counter (OTC) derivatives trades. Regulators should be cognizant that large banks active in the OTC derivatives market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central counterparties (CCPs) would require large increases in posted collateral, possibly requiring large banks to raise more capital. These costs suggest that most large banks will be reluctant to offload their positions to CCPs, and the paper proposes an appropriate capital levy on remaining positions to encourage the transition.
Over-the-counter Derivatives and the Systematic Risk to the Global Financial System
Over-the-counter Derivatives and the Systematic Risk to the Global Financial System - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Over-the-counter Derivatives and the Systematic Risk to the Global Financial System write by Michael R. Darby. This book was released on 1994. Over-the-counter Derivatives and the Systematic Risk to the Global Financial System available in PDF, EPUB and Kindle.
OTC Derivatives: Bilateral Trading and Central Clearing
OTC Derivatives: Bilateral Trading and Central Clearing - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook OTC Derivatives: Bilateral Trading and Central Clearing write by David Murphy. This book was released on 2013-08-07. OTC Derivatives: Bilateral Trading and Central Clearing available in PDF, EPUB and Kindle. After the credit crisis, supervisors enacted a range of financial reforms. In particular, they radically changed the nature of the OTC derivatives market via a number of measures, notably mandatory central clearing. This book discusses the market before the crisis, explains what central clearing is, and outlines the consequences of the new rules.
Modern Banking and OTC Derivatives Markets
Modern Banking and OTC Derivatives Markets - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Modern Banking and OTC Derivatives Markets write by Mr.R. Sean Craig. This book was released on 2001-01-09. Modern Banking and OTC Derivatives Markets available in PDF, EPUB and Kindle. This chapter provides an overview of market practices, market structure, and official supervision and regulation in financial markets. This paper also highlights the key features of modern banking and over the counter (OTC) derivatives markets that seem to be relevant for assessing their functioning, their implications for systemic financial risks in the international financial system, and areas where improvements in ensuring financial stability can be obtained. The paper also describes how OTC derivatives activities have transformed modern financial intermediation and discusses how internationally active financial institutions have become exposed to additional sources of instability because of their large and dynamic exposures to the counterparty (credit) risks embodied in their OTC derivatives activities. In order to rebalance private and official roles, it is essential first to clarify the limits to market discipline in OTC derivatives markets, before leaning more heavily on aspects of market discipline that seem to work well in these markets.
