Classifying Counterparty Sector in EMIR Data

Abstract

The data collected under the European Market Infrastructure Regulation (“EMIR data”) provide authorities with voluminous transaction-by-transaction details on derivatives but their use poses numerous challenges. To overcome one major challenge, this chapter draws from eight different data sources and develops a greedy algorithm to obtain a new counterparty sector classification. We classify counterparties’ sector for 96% of the notional value of outstanding contracts in the euro area derivatives market. Our classification is also detailed, comprehensive, and well suited for the analysis of the derivatives market, which we illustrate in four case studies. Overall, we show that our algorithm can become a key building block for a wide range of research- and policy-oriented studies with EMIR data.

The Impact of Derivatives Collateralisation on Liquidity Risk: Evidence from the Investment Fund Sector

“…wrongly reported as denominated in US dollar instead of Indian rupee). To identify trades conducted by euro area funds, we filter the EMIR data using the sector classification developed in Lenoci and Letizia (2021), which also provides information on the type of fund and investment strategy. Overall, the results suggest that the notional Having cleaned the EMIR data, we enrich them with information on the products underlying the derivative instruments held by euro area investment funds.…”

The Impact of Derivatives Collateralization on Liquidity Risk: Evidence from the Investment Fund Sector

“…Specifically, we replace wrongly reported currency (typically US dollars) with local currency (for example, Indian rupees) . To identify trades conducted by euro area funds, we filter the EMIR data using the sector classification developed in Lenoci and Letizia (2021), that also provide information on the type of fund and investment strategy.…”

Evaluating Market Risk from Leveraged Derivative Exposures

“…Finally, I employ the classification from (Lenoci and Letizia, 2021) to identify the sector of the counterparty.…”