Evaluating Market Risk from Leveraged Derivative Exposures

Jukonis, Audrius

doi:10.2139/ssrn.4221526

Cited by 3 publications

(2 citation statements)

References 12 publications

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“…While Schrimpf et al (2020) emphasises the role of variation margin calls on highly leveraged hedge funds in amplifying market dynamics in the US Treasury market in the March 2020 market turmoil, the study ECB Working Paper Series No 2756 / December 2022 is only indicative regarding the level of liquidity stress that these funds faced. Since liquidity and leverage in non-banks can be interlinked (Aramonte et al, 2021), our paper complements the literature on leverage in funds (Fricke, 2021 and non-banks more generally (Ianiro et al, 2022, Jukonis, 2022. The topic of highly leveraged non-banks has recently gained traction, owing to the failure of Archegos, a US family office, in March 2021 (ESMA, 2022, SEC, 2022.…”

Section: Introductionmentioning

confidence: 80%

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

Jukonis¹,

Letizia²,

Rousová³

2022

SSRN Journal

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Section: Introductionmentioning

confidence: 80%

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

Jukonis¹,

Letizia²,

Rousová³

2022

SSRN Journal

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“…First of all, these big data provide us with information on derivative portfolios held by euro area funds. Second, combined with external data sources, they allow us to develop pricing functions for several types of contracts, , our paper complements the literature on leverage in funds(Fricke 2021;Molestina Vivar et al 2020) and nonbanks more generally(Ianiro et al 2022;Jukonis 2022).…”

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confidence: 83%

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

Jukonis

2024

IMF Working Papers

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Stricter derivative margin requirements have increased the demand for liquid collateral, but euro area investment funds, which use derivatives extensively, have been reducing their liquid asset holdings. Using transaction-by-transaction derivatives data, we assess whether the current levels of funds' holdings of cash and other highly liquid assets would be adequate to meet funds' liquidity needs to cover variation margin calls on derivatives under a range of stress scenarios. The estimates indicate that between 13 percent and 33 percent of euro area funds with sizeable derivatives exposures may not have sufficient liquidity buffers to meet the calls under adverse market shocks. As a result, they are likely to redeem money market fund (MMF) shares, procyclically sell assets, and draw on credit lines, thus amplifying the market dynamics under such stress scenarios. Our findings highlight the importance of further work to assess the potential role of macroprudential policies for nonbanks, particularly regarding liquidity risk in funds.

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Exploring the dynamics of macro-economic factors on financial stability of listed grocery stores in developing African economies

Nzuza,

Obagbuwa,

Rajaram

2024

2024 International Conference on Science, Engineering and Business for Driving Sustainable Development Goals (SEB4SDG)

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Evaluating Market Risk from Leveraged Derivative Exposures

Cited by 3 publications

References 12 publications

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

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

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

Exploring the dynamics of macro-economic factors on financial stability of listed grocery stores in developing African economies

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