Classifying Counterparty Sector in EMIR Data
AbstractThe 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.