Modpartsrisiko og ny regulering
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Reynheim, Jakup1, Forfatter
Norman Sørensen, Peter2, Vejleder
1Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7001              
2Økonomisk Institut, Det Samfundsvidenskabelige Fakultet, Københavns Universitet, København, Danmark, diskurs:7014              
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Ukontrollerede emneord: CVA, CCP, Central Clearing, Basel III, EMIR, Regulation, Systemic risk
 Abstract: With the bankruptcy of Lehman Brothers in August 2008 and the ensuing global financial crises it spurred, counterparty credit risk has risen to prominence in the minds of both banks and legislators. The crisis demonstrated the need for an enhanced and more comprehensive treatment of counterparty risk in order to ensure financial stability. The new Basel III accord will address exposures with over-the-counter (OTC) derivatives by placing higher capital requirements on them. The European Market Infrastructure Regulation and the Dodd-Frank Act. will address the question of central clearing in EU and America respectively. Both of these proposals mandate central clearing of derivatives that are traded OTC.
A central counterparty (CCP) intermediates derivatives transactions, and acts as an insurer of counterparty risk. By effectively assuming the role of counterparty to every transaction it clears, it simplifies the relations in financial markets significantly. A CCP can reduce gross exposure through effective netting and mitigate the destabilizing effects, of defaults through efficient risk management. Finally, losses within a CCP are mutualized among its members, thus reducing the chance of domino effects that can threaten the entire system.
Credit Value Adjustment (CVA) is the mark-to-market value of the credit risk towards a counterparty, and is a key expression for its associated risk. Prior to the latest financial crisis, banks were not required to hold capital towards their CVA risks, but this will change hence forward. The addition of CVA constitutes a significant upgrade of how counterparty credit risk was previously treated. Not only will it encourage banks to monitor their credit exposures much closer, but it also ensures larger capital buffers to cover losses when they arise.
The advantages listed above can all be said to be microprudentially sound in that they promote the safety of individual banks. However, I argue that often microprudentially sound policies create systemic risks that have macroprudential consequences, and may threaten the stability of the financial system.
For instance rigid collateralization - which is a key risk management tool that CCPs employ - can exacerbate economic shocks. Following a price shock, a counterparty may be forced to liquidate loosing position in order to meet margin calls. However because this happens precisely, when markets are illiquid it will tend to exacerbate price movements, thus stressing markets even further.
Likewise a bank hedging its CVA risks via a Credit Default Swap (CDS) may experience a negative feedback loop. If the CDS spread of a given counterparty rises, the bank will have a higher CVA charge. In order to hedge this exposure it may purchase a CDS on the counterparty. However this tends to increase the spread if the instrument is relatively illiquid, prompting the CVA to rise even further.
Introducing mandatory clearing creates another important risk. The clearing members will all be exposed to the CCP either directly or indirectly, and therefore CCPs will be a potential source for systemic risk. Because CCPs will constitute crucial nodes in the financial network, their failure would be a systemic event and this failure would lead to devastating effects on the overall global financial stability. Naturally CCPs will be required to have access to substantial capital reserves, but since the reserves will not be unlimited, their failure – although unlikely - would be possible. A failure would occur exactly, when they are needed the most to guarantee financial stability.
As I have explained, CVA and CCPs both present advantages that help ensure the survival of individual banks, but also introduces new systemic risks that may threaten the broader financial stability. It is not obvious whether the advantages outweigh the disadvantages. Regulators need to carefully consider both aspects, when evaluating the effects of the new reforms.
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Bogmærk denne post:
 Type: Speciale
Alternativ titel: Modpartsrisiko og ny regulering
Alternativ titel: Counterparty credit risk and new regulation
Alternativ titel: An investigation of financial reforms
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Sprog: Danish - dan
 Datoer: 2012-09-18
 Sider: -
 Publiceringsinfo: København : Københavns Universitet
 Indholdsfortegnelse: Abstract 5
Forord 7
Forkortelser 8
Del I - Indledning 9
1. Indledning 9
1.1. Problemformulering og opgavens opbygning 10
Del II – Teori og baggrund 12
2. Regulering af banker 12
2.1. Bankers funktion 12
2.2. Rationale for regulering 14
2.2.1. Eksternaliteter 16
2.2.2. Systemisk risiko . 19
2.3. Omkostning ved regulering 20
2.3.1. Modigliani-Miller: . 21
2.4. Delkonklusion . 23
3. Kreditrisiko 25
3.1. Definition 25
3.2. CVA 25
3.3. Bilateral CVA . 26
3.4. Kreditrisikoreducerende metoder . 27
3.4.1. Netting . 28
3.4.2. Kollateral . 29
3.5. Delkonklusion . 30
4. Central clearing 30
4.1. Hvad er central clearing? 30
4.2. Nettingefficiens 33
4.2.1. Nettingefficiens ved bilateral netting 34
4.2.2. Nettingefficiens ved central clearing . 36
4.2.3. Diskussion . 37
4.3. Delkonklusion . 38
Del III – Ny regulering 39
5. Regulering og Basel 39
5.1. Før Basel III 39
5.2. Baggrund og formål for Basel III . 40
5.3. Modpartsrisiko under Basel III . 41
5.3.1. IMM-metode for CVA 41
5.3.2. Standardmetode for CVA 42
5.4. Kapitalkrav for eksponeringer overfor CCP . 43
5.5. Quantitative Impact Study 44
5.6. Delkonklusion . 45
6. Regulering og central clearing 46
6.1. European Market Infrastructure Regulation . 46
6.2. Delkonklusion: . 48
Del IV - Analyse 49
7. Diskussion af CVA 49
7.1. CVA eller bilateral CVA 49
7.2. Valg af metode og formel . 51
7.3. Hedging af CVA . 52
7.4. Mindre virksomheder . 55
7.5. Delkonklusion . 55
8. Central clearing 56
8.1. Hvorfor får CCP øget betydning 56
8.2. Litteraturreview 57
8.3. Heller og Vause (2012). 58
8.4. Hvilke produkter kan cleares? 60
8.5. Fordele og ulemper ved CCP 61
8.5.1. Fordele: 62
8.5.2. Ulemper . 63
8.5.3. Diskussion . 65
8.6. Delkonklusion . 67
Del V – Evaluering 69
9. Diskussion af regulering og finansiel stabilitet 69
9.1. Systemiske risici . 69
9.2. Regulatorisk arbitrage. 72
10. Konklusion 73
Litteraturliste 76
Appendix 81
 Note: -
 Type: Speciale
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