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This thesis is going to try to answer the following question: do central counterparty houses
(CCP) ensure the financial markets as regulators intend to do via the mandatory clearing
requirement for derivatives?

The size of CCPs had skyrocketed in the last years mainly due to the mandatory clearing
requirements. Currently, the EU and the US are requiring Interest Rate Swaps and Credit
Default Swaps to clear in agreement with their respective laws, European Market
Infrastructure Regulation and Dodd-Frank Act. CCPs are expected to keep growing as more
clearing requirements will probably be establishing.

Many issues are rising about the service provided and the safety of theses newly became too
big too fail CCPs. As a matter of fact, few CCPs are ensuring together derivatives for more
than 200 trillions of dollars. Are really CCPs able to ensure all cleared trade? Are the current
CCPs able to face a financial crisis (such as in 2007)? Does the clearing requirement make the
financial markets safer?

While analysing the aims and the scopes of the EU and the US regulations, I reviewed the
most relevant risks for the current CCPs. As the total risk is seen at a high level by major
banks, I investigated the default framework for the event of a collapsing CCP.

CCP --- Clearinghouse --- Central counterparty --- EMIR --- Dodd-Frank Act --- counterparty risk --- competition risk --- default framework --- operating risk --- Sciences économiques & de gestion > Finance

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Credit risk remains one of the major risks faced by most financial and credit institutions. It is deeply connected to the real economy due to the systemic nature of some banks, but also because well-managed lending facilities are key for wealth creation and technological innovation. This book is a collection of innovative papers in the field of credit risk management. Besides the probability of default (PD), the major driver of credit risk is the loss given default (LGD). In spite of its central importance, LGD modeling remains largely unexplored in the academic literature. This book proposes three contributions in the field. Ye & Bellotti exploit a large private dataset featuring non-performing loans to design a beta mixture model. Their model can be used to improve recovery rate forecasts and, therefore, to enhance capital requirement mechanisms. François uses instead the price of defaultable instruments to infer the determinants of market-implied recovery rates and finds that macroeconomic and long-term issuer specific factors are the main determinants of market-implied LGDs. Cheng & Cirillo address the problem of modeling the dependency between PD and LGD using an original, urn-based statistical model. Fadina & Schmidt propose an improvement of intensity-based default models by accounting for ambiguity around both the intensity process and the recovery rate. Another topic deserving more attention is trade credit, which consists of the supplier providing credit facilities to his customers. Whereas this is likely to stimulate exchanges in general, it also magnifies credit risk. This is a difficult problem that remains largely unexplored. Kanapickiene & Spicas propose a simple but yet practical model to assess trade credit risk associated with SMEs and microenterprises operating in Lithuania. Another topical area in credit risk is counterparty risk and all other adjustments (such as liquidity and capital adjustments), known as XVA. Chataignier & Crépey propose a genetic algorithm to compress CVA and to obtain affordable incremental figures. Anagnostou & Kandhai introduce a hidden Markov model to simulate exchange rate scenarios for counterparty risk. Eventually, Boursicot et al. analyzes CoCo bonds, and find that they reduce the total cost of debt, which is positive for shareholders. In a nutshell, all the featured papers contribute to shedding light on various aspects of credit risk management that have, so far, largely remained unexplored.

Coins, banknotes, medals, seals (numismatics) --- recovery rates --- beta regression --- credit risk --- contingent convertible debt --- financial modelling --- risk management --- financial crisis --- recovery rate --- loss given default --- model ambiguity --- default time --- no-arbitrage --- reduced-form HJM models --- recovery process --- Counterparty Credit Risk --- Hidden Markov Model --- Risk Factor Evolution --- Backtesting --- FX rate --- Geometric Brownian Motion --- trade credit --- small and micro-enterprises --- financial non-financial variables --- risk assessment --- logistic regression --- probability of default --- wrong-way risk --- dependence --- urn model --- counterparty risk --- credit valuation adjustment (CVA) --- XVA (X-valuation adjustments) compression --- genetic algorithm --- n/a

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Credit risk remains one of the major risks faced by most financial and credit institutions. It is deeply connected to the real economy due to the systemic nature of some banks, but also because well-managed lending facilities are key for wealth creation and technological innovation. This book is a collection of innovative papers in the field of credit risk management. Besides the probability of default (PD), the major driver of credit risk is the loss given default (LGD). In spite of its central importance, LGD modeling remains largely unexplored in the academic literature. This book proposes three contributions in the field. Ye & Bellotti exploit a large private dataset featuring non-performing loans to design a beta mixture model. Their model can be used to improve recovery rate forecasts and, therefore, to enhance capital requirement mechanisms. François uses instead the price of defaultable instruments to infer the determinants of market-implied recovery rates and finds that macroeconomic and long-term issuer specific factors are the main determinants of market-implied LGDs. Cheng & Cirillo address the problem of modeling the dependency between PD and LGD using an original, urn-based statistical model. Fadina & Schmidt propose an improvement of intensity-based default models by accounting for ambiguity around both the intensity process and the recovery rate. Another topic deserving more attention is trade credit, which consists of the supplier providing credit facilities to his customers. Whereas this is likely to stimulate exchanges in general, it also magnifies credit risk. This is a difficult problem that remains largely unexplored. Kanapickiene & Spicas propose a simple but yet practical model to assess trade credit risk associated with SMEs and microenterprises operating in Lithuania. Another topical area in credit risk is counterparty risk and all other adjustments (such as liquidity and capital adjustments), known as XVA. Chataignier & Crépey propose a genetic algorithm to compress CVA and to obtain affordable incremental figures. Anagnostou & Kandhai introduce a hidden Markov model to simulate exchange rate scenarios for counterparty risk. Eventually, Boursicot et al. analyzes CoCo bonds, and find that they reduce the total cost of debt, which is positive for shareholders. In a nutshell, all the featured papers contribute to shedding light on various aspects of credit risk management that have, so far, largely remained unexplored.

Coins, banknotes, medals, seals (numismatics) --- recovery rates --- beta regression --- credit risk --- contingent convertible debt --- financial modelling --- risk management --- financial crisis --- recovery rate --- loss given default --- model ambiguity --- default time --- no-arbitrage --- reduced-form HJM models --- recovery process --- Counterparty Credit Risk --- Hidden Markov Model --- Risk Factor Evolution --- Backtesting --- FX rate --- Geometric Brownian Motion --- trade credit --- small and micro-enterprises --- financial non-financial variables --- risk assessment --- logistic regression --- probability of default --- wrong-way risk --- dependence --- urn model --- counterparty risk --- credit valuation adjustment (CVA) --- XVA (X-valuation adjustments) compression --- genetic algorithm

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This paper discusses findings of the assessments on Committee on Payment and Settlement Systems–International Organization of Securities Commissions (CPSS-IOSCO) Recommendations for Securities Settlement Systems and Central Counterparties in India. The results indicate that, in general, the risk management framework for the securities and derivatives clearing and settlement systems in India is prudent. The operational reliability is high, and the regulation and oversight functions are effective. The National Payments System in India has undergone a major reform, in particular the securities and derivatives clearing and settlement systems. These systems are comprehensive and designed to minimize risks in the rapidly developing securities and derivatives markets.

Securities --- Finance --- Banks and Banking --- Finance: General --- Investments: General --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Investment & securities --- Banking --- Government securities --- Securities settlement systems --- Stock markets --- Financial institutions --- Financial markets --- Central counterparty clearing house --- Financial instruments --- Clearing of securities --- Banks and banking --- Stock exchanges --- Clearinghouses --- India

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Credit derivative markets are largely unregulated, but calls are increasingly being made for changes to this "hands off" stance, amidst concerns that they helped to fuel the current financial crisis, or that they could be a cause of the next one. The purpose of this paper is to address two basic questions: (i) do credit derivative markets increase systemic risk; and (ii) should they be regulated more closely, and if so, how and to what extent? The paper begins with a basic description of credit derivative markets and recent events, followed by an assessment of their recent association with systemic risk. It then reviews and evaluates some of the authorities' proposed initiatives, and discusses some alternative directions that could be taken.

Banks and Banking --- Finance: General --- Money and Monetary Policy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- General Financial Markets: General (includes Measurement and Data) --- Monetary economics --- Finance --- Financial services law & regulation --- Credit default swap --- Credit --- Credit risk --- Central counterparty clearing house --- Derivative markets --- Financial risk management --- Clearinghouses --- Banking --- Derivative securities --- United States