Office Of Financial Research Update Measuring Systemwide Resilience Of Central Counterparties

The U.S. Office of Financial Research today posted a research brief, entitled, “Measuring Systemwide Resilience of Central Counterparties.” This brief proposes a novel way to conduct a U.S. systemwide stress test of central counterparties, or CCPs. The approach takes into account the impacts of losses and defaults at CCPs’ member banks. It would require little extra effort by companies because regulators can use the results of existing stress tests of CCPs.

The brief can be found here: https://www.financialresearch.gov/briefs/.

The OFR also posted a working paper, entitled, "Persistence and Procyclicality in Margin Requirements." This paper describes how to set margin levels for derivatives contracts so that margin calls do not add to market stress during times of instability. Price volatility varies by asset class. Certain qualities of volatility should be taken into account to set the most effective margin levels without adding to market stress.

The working paper can be found here: https://www.financialresearch.gov/working-papers/.

The OFR home page is at: https://www.financialresearch.gov/.