BoE paper backs CCP discretion over optimal resource allocation
A financial stability paper published today by the Bank of England (BoE) finds central counterparties (CCPs) are better able to optimise their resources for absorbing losses when given a degree of discretion.
Central counterparties and their financial resources – a numerical approach, by Paul Nahai-Williamson, Tomohiro Ota, Mathieu Vital and Anne Wetherilt, models the choices made by a CCP in provisioning against losses through a default fund, where losses are shared, and initial margin, where
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