Managing risk in multi-asset class, multimarket central counterparties: The CORE approach

Vicente, Luis; Cerezetti, Fernando; Faria, S.R.; Iwashita, T.; Pereira, Octávio

doi:10.1016/j.jbankfin.2014.08.016

Cited by 15 publications

(5 citation statements)

References 15 publications

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“…Cerezetti et al (2019b) finds that hedging costs vary more than commonly thought and there are multiple ways of attaining the minimum cost. Vicente et al (2015) offer a statistical model for a close out strategy for multi asset class CCPs. Finally, Vicente et al (2017) show on the basis of a calibrated, theoretical model how to hedge better, so losses can be reduced.…”

Section: Default Management Proceduresmentioning

confidence: 99%

Five Fundamental Questions on Central Counterparties

Berndsen

2020

SSRN Journal

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Section: Default Management Proceduresmentioning

confidence: 99%

Five Fundamental Questions on Central Counterparties

Berndsen

2020

SSRN Journal

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“…No matter what the applied method is, the pivotal part of the margin model is a risk measure, or an alternative method that can capture the underlying risk of the asset's or portfolio's change in the value. In most cases—in practice and in academic studies as well—the calculation of the initial margin relies on the Value at Risk (VaR) risk measure (Vicente et al, 2015). The input parameters of VaR are strictly regulated by the EMIR (European Union, 2012), with the inclusion of the look‐back period, the liquidation period, and the significance level.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This implies that a method neglecting the correlation structure between assets is not necessarily the most effective one to handle risk. Moreover, Vicente et al (2015) stated that by not taking into account the diversification effect on portfolio level by CCPs to reduce the risk of a potential underestimation of the margin, does not necessarily lead to a reduction in the systemic risk. For example, the clearing members themselves are not incentivized to eliminate their own risk via diversification or applying a hedging strategy.…”

Section: Literature Reviewmentioning

confidence: 99%

Margin requirements based on a stochastic correlation model

Szabó

Váradi

2022

Journal of Futures Markets

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We demonstrate that margin requirements of central counterparties show a significantly different behavior when calculated with a portfoliowise treatment instead of taking the weighted sum of the margin requirements of the components without accounting for their correlation structures. This is shown via simulating trajectories of a joint stochastic volatility–stochastic correlation model. Results indicate that an unnecessarily large overmargin requirement is set by regulators when the applied risk measure is not calculated via a portfoliowise treatment. Finally, accounting for the correlation structure of the assets during the margining process would not lead to an overly prudent method, nor would it cause greater procyclicality.

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“…Increased globalization, leading to amplified uncertainties has compelled investors to search for safe alternatives (Kaplan, 2015). This emerging need has also drawn the attention of researchers and asset managers to investigate some safe alternative investment options that could provide protection to investors amid uncertainties (Vicente, Cerezetti, Faria, Iwashita & Pereira, 2015). Although investment environments are always surrounded by different risks like economic uncertainties, financial uncertainties, policy uncertainty etc.…”

Section: Introductionmentioning

confidence: 99%

Is Gold a Hedge and Safe Haven during Political Uncertainties?

Rasheed¹,

Ahmad²,

Javid³

2021

BER

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Technological advancements not only bolstered almost all activities, but also accelerated the spread of information in blinks. Thus, announcements about market volatilities along with subpar financial instruments’ performance have led investors to search for alternative assets to cope with amplified uncertainties. Investors in politically unstable economies, like Pakistan, are more prone to the risks of uncertainties so require some safe investments. Previously gold has been investigated as a hedge and safe haven during various economic and market conditions but literature lacks investigation of gold during political uncertainties. So by investigating the role of gold as a hedge and safe haven during political uncertainties against sectors of Pakistan Stock Exchange (PSX), the current study not only contributes to literature, but also contributes to the knowledge of Pakistani investors and asset managers that whether they should consider gold as a diversifier or not. The study incorporates daily gold prices (gold bullion Pkr. per Tola), daily stock prices of PSX sectors and political events of Pakistan for a time span of 2009 to 2019. Appling EGARCH with quantile dummies and event dummies, findings indicate that gold acts as a hedge and safe haven against the stock market and most of its sectors in normal as well as politically uncertain situations. Thus, Pakistani investors must consider gold in asset allocation strategies for having an optimal portfolio that can cope with the risk of acute market conditions and political uncertainties. Finings of current study facilitate Pakistani investors, investment advisors and asset managers to make healthy investment decisions and enjoying the benefits of diversification through inclusion of gold in their portfolios.

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Managing risk in multi-asset class, multimarket central counterparties: The CORE approach

Cited by 15 publications

References 15 publications

Five Fundamental Questions on Central Counterparties

Five Fundamental Questions on Central Counterparties

Margin requirements based on a stochastic correlation model

Is Gold a Hedge and Safe Haven during Political Uncertainties?

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