Office Of Financial Research Update: “How Safe Are Central Counterparties In Derivatives Markets?”

The OFR issued a working paper, titled, “How Safe are Central Counterparties in Derivatives Markets?” This paper uses credit default swap data to estimate the direct and indirect impacts of a default by CCP counterparties in derivatives trades. It finds that a CCP could be more vulnerable to failure than conventional stress tests have shown.

The OFR also issued an accompanying blog by Deputy Director for Research and Analysis Stacey Schreft, titled, “How Well Will a Central Counterparty Withstand Severe Credit Stress?”

The blog can be found here.

The working paper can be found here.

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