Derivatives Clearing, Default Risk, and Insurance
Identifieur interne : 002964 ( Istex/Corpus ); précédent : 002963; suivant : 002965Derivatives Clearing, Default Risk, and Insurance
Auteurs : Robert A. Jones ; Christophe PérignonSource :
- Journal of Risk and Insurance [ 0022-4367 ] ; 2013-06.
Abstract
Using daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members. We find that the major source of default risk for a clearing member is proprietary trading rather than trading by customers. Additionally, we show that extreme losses suffered by important clearing firms tend to cluster, which raises systemic risk concerns. Finally, we discuss how private insurance could be used to cover the loss from defaults by clearing members.
Url:
DOI: 10.1111/j.1539-6975.2012.01489.x
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We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</mods:affiliation></affiliation></author><author><name sortKey="Perignon, Christophe" sort="Perignon, Christophe" uniqKey="Perignon C" first="Christophe" last="Pérignon">Christophe Pérignon</name><affiliation><mods:affiliation>Robert A. Jones is at Simon Fraser University, Vancouver, Canada. Christophe Pérignon is at HEC Paris, France, where he holds the Deloitte and Société Générale Chair in Energy and Finance. The authors can be contacted via e‐mail: rjones@sfu.ca and perignon@hec.fr, respectively. We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</mods:affiliation></affiliation></author></titleStmt><publicationStmt><idno type="wicri:source">ISTEX</idno><idno type="RBID">ISTEX:D5BC572BBFBD1A45AABB768BD73FB0E149B63013</idno><date when="2013" year="2013">2013</date><idno type="doi">10.1111/j.1539-6975.2012.01489.x</idno><idno type="url">https://api-v5.istex.fr/document/D5BC572BBFBD1A45AABB768BD73FB0E149B63013/fulltext/pdf</idno><idno type="wicri:Area/Istex/Corpus">002964</idno><idno type="wicri:explorRef" wicri:stream="Istex" wicri:step="Corpus" wicri:corpus="ISTEX">002964</idno></publicationStmt><sourceDesc><biblStruct><analytic><title level="a" type="main" xml:lang="en">Derivatives Clearing, Default Risk, and Insurance</title><author><name sortKey="Jones, Robert A" sort="Jones, Robert A" uniqKey="Jones R" first="Robert A." last="Jones">Robert A. 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We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</affiliation></author><author xml:id="author-2"><persName><forename type="first">Christophe</forename><surname>Pérignon</surname></persName><affiliation>Robert A. Jones is at Simon Fraser University, Vancouver, Canada. 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We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</affiliation></author></analytic><monogr><title level="j">Journal of Risk and Insurance</title><idno type="pISSN">0022-4367</idno><idno type="eISSN">1539-6975</idno><idno type="DOI">10.1111/(ISSN)1539-6975</idno><imprint><publisher>Blackwell Publishing Inc</publisher><pubPlace>Malden, USA</pubPlace><date type="published" when="2013-06"></date><biblScope unit="volume">80</biblScope><biblScope unit="issue">2</biblScope><biblScope unit="page" from="373">373</biblScope><biblScope unit="page" to="400">400</biblScope></imprint></monogr><idno type="istex">D5BC572BBFBD1A45AABB768BD73FB0E149B63013</idno><idno type="DOI">10.1111/j.1539-6975.2012.01489.x</idno><idno type="ArticleID">JORI1489</idno></biblStruct></sourceDesc></fileDesc><profileDesc><creation><date>2013</date></creation><langUsage><language ident="en">en</language></langUsage><abstract xml:lang="en"><p>Using daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members. 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Jones is at Simon Fraser University, Vancouver, Canada. Christophe Pérignon is at HEC Paris, France, where he holds the Deloitte and Société Générale Chair in Energy and Finance. The authors can be contacted via e‐mail: <email>rjones@sfu.ca</email> and <email>perignon@hec.fr</email>, respectively. We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</unparsedAffiliation></affiliation></affiliationGroup><abstractGroup><abstract type="main" xml:lang="en"><title type="main">A<sc>bstract</sc></title><p>Using daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members. 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We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</affiliation><role><roleTerm type="text">author</roleTerm></role></name><name type="personal"><namePart type="given">Christophe</namePart><namePart type="family">Pérignon</namePart><affiliation>Robert A. Jones is at Simon Fraser University, Vancouver, Canada. Christophe Pérignon is at HEC Paris, France, where he holds the Deloitte and Société Générale Chair in Energy and Finance. The authors can be contacted via e‐mail: rjones@sfu.ca and perignon@hec.fr, respectively. We are grateful to two anonymous referees, Viral Acharya, David Bates, Laurent Calvet, Jorge Cruz Lopez, Francois Derrien, Thierry Foucault, Laurent Frésard, Thomas Gilbert, Amit Goyal, Jeff Harris, Christophe Hurlin, Dusan Isakov, Michael King, Paul Kupiec, Jacques Olivier, Olivier Scaillet, Daniel Smith, Matthew Spiegel, René Stulz, David Thesmar, and Christophe Villa, as well as participants at the 18th Annual Derivatives Securities and Risk Management Conference (FDIC), 2008 Meeting of the French Finance Association, 2009 Meeting of the Midwest Finance Association, and seminar participants at the Bank for International Settlements, CORE‐UCL, HEC Paris, and University of Geneva for their comments.</affiliation><role><roleTerm type="text">author</roleTerm></role></name><typeOfResource>text</typeOfResource><genre type="article" displayLabel="article"></genre><originInfo><publisher>Blackwell Publishing Inc</publisher><place><placeTerm type="text">Malden, USA</placeTerm></place><dateIssued encoding="w3cdtf">2013-06</dateIssued><copyrightDate encoding="w3cdtf">2013</copyrightDate></originInfo><language><languageTerm type="code" authority="rfc3066">en</languageTerm><languageTerm type="code" authority="iso639-2b">eng</languageTerm></language><physicalDescription><internetMediaType>text/html</internetMediaType><extent unit="figures">3</extent><extent unit="tables">8</extent><extent unit="formulas">446</extent><extent unit="references">58</extent></physicalDescription><abstract lang="en">Using daily data on margins and variation margins for all clearing members of the Chicago Mercantile Exchange, we analyze the clearing house exposure to the risk of default by clearing members. We find that the major source of default risk for a clearing member is proprietary trading rather than trading by customers. Additionally, we show that extreme losses suffered by important clearing firms tend to cluster, which raises systemic risk concerns. 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