Central Counterparties: Mandatory Central Clearing and Bilateral Margin Requirements for OTC Derivatives
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Practical guidance toward handling the latest changes to the OTC derivatives market
Central Counterparties is a practical guide to central clearing and bilateral margin requirements, from one of the industry's most influential credit practitioners. With up-to-date information on the latest regulations imposed after the global financial crisis, this book covers the mechanics of the clearing process and analyses the resulting consequences. Detailed discussion explains the ways in which the very significant clearing and margining rules will affect the OTC derivatives market and the financial markets in general, with practical guidance toward implementation and how to handle the potential consequences.
Over-the-counter derivatives were blamed by many for playing a major role in the 2007 financial crisis, resulting in a significant attention and dramatic action by policymakers, politicians, and regulators to reduce counterparty credit risk which was seen as a major issue in the crisis. The two most important regulatory changes are the mandatory clearing of standardised OTC derivatives, and the requirements for bilateral margin posting in non-standard OTC contracts. Central Counterparties is a complete reference guide to navigating these changes, providing clarification and practical advice.
*Review the mitigation of counterparty credit risk with the historical development of central clearing *Clarify the latest regulatory requirements imposed by Dodd-Frank, EMIR, Basel III and more *Learn the mechanics of central clearing, with special attention to complex issues such as margin calculations, the loss waterfall, client clearing and regulatory capital rules *Gain insight into the advantages and disadvantages of clearing and bilateral margin requirements, and the potential issues that ariseAs the clearing and margining mandates are phased in, the associated costs will be severe enough to dramatically shift the topology of the financial markets and transform the nature of risk. Central Counterparties provides the information, clarification and expert insight market practitioners need to get up to speed quickly.
DR JON GREGORY is a partner at Solum Financial Partners LLP and specialises in counterparty risk and CVA related consulting and advisory projects. He has worked on many aspects of credit risk in his career, being previously with Barclays Capital, BNP Paribas and Citigroup. He is author of the book Counterparty Credit Risk and Credit Value Adjustment: A Continuing Challenge for Global Financial Markets Second Edition. Jon holds a PhD from Cambridge University.
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