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Central Clearing: Risks and Customer Protections
In the wake of the 2008 global financial crisis, the Group of Twenty (G-20) developed a regulatory reform program for derivatives contracts. This article examines the impact of the market structure change and associated customer protection frameworks on risks faced by market participants.
The Life Insurance Industry and Systemic Risk: A Bond Market Perspective
The 2008 financial crisis brought a focus on the potential for a large insurance firm to contribute to systemic risk. Among the concerns raised was that a negative shock to insurers could lead to a ?fire sale? of corporate bonds, a market where insurers are among the largest participants. This paper discusses the existing evidence on life insurance firms and systemic risk, with a focus on the investment grade corporate bond market. We provide some tentative evidence that life insurers tend to absorb liquidity risk by purchasing bonds when the bonds are less liquid than average. However, we do ...
Cleared Margin Setting at Selected Central Counterparties
Interviews with senior personnel at six of the world?s largest central counterparty clearing houses and research by financial markets staff shed light on regulations, principles, and best practices in margin setting for derivatives.
OTC Derivatives—A Primer on Market Infrastructure and Regulatory Policy
In this article, we discuss some recent developments relating to the regulation of derivatives markets, specifically the Group of Twenty (G-20) mandates, and examine the infrastructure that supports derivatives markets (including both the trade execution and post-trade clearing and settlement processes). Then we identify some of the policy issues raised by the G-20 market structure mandates. To provide a foundation for that discussion, first we explain some key concepts and terms.