Network effects, cascades and CCP interoperability

2014 ◽  
Vol 25 (09) ◽  
pp. 1450035
Author(s):  
Xiaobing Feng ◽  
Haibo Hu ◽  
Matthew Pritsker
Keyword(s):  
Systemic Risk ◽  
Risk Sharing ◽  
Network Effects ◽  
Threshold Value ◽  
Cascading Failures ◽  
Counterparty Risk ◽  
Financial Regulations ◽  
Logistic Mapping ◽  
The World ◽  
Near Term

To control counterparty risk, financial regulations such as the Dodd Frank Act are increasingly requiring standardized derivatives trades to be cleared by central counterparties (CCPs). It is anticipated that in the near-term future, CCPs across the world will be linked through interoperability agreements that facilitate risk-sharing but also serve as a conduit for transmitting shocks. This paper theoretically studies a network with CCPs that are linked through interoperability arrangements, and studies the properties of the network that contribute to cascading failures. The magnitude of the cascading is theoretically related to the strength of network linkages, the size of the network, the logistic mapping coefficient, a stochastic effect and CCP's defense lines. Simulations indicate that larger network effects increase systemic risk from cascading failures. The size of the network N raises the threshold value of shock sizes that are required to generate cascades. Hence, the larger the network, the more robust it will be.

CCP interoperability and system stability

2016 ◽  
Vol 27 (03) ◽  
pp. 1650025
Author(s):  
Xiaobing Feng ◽  
Haibo Hu
Keyword(s):  
Risk Sharing ◽  
System Stability ◽  
Cascading Failures ◽  
Counterparty Risk ◽  
Financial Regulations ◽  
The World ◽  
Central Counterparties ◽  
Near Term

To control counterparty risk, financial regulations such as the Dodd–Frank Act are increasingly requiring standardized derivatives trades to be cleared by central counterparties (CCPs). It is anticipated that in the near term future, CCPs across the world will be linked through interoperability agreements that facilitate risk sharing but also serve as a conduit for transmitting shocks. This paper theoretically studies a networked network with CCPs that are linked through interoperability arrangements. The major finding is that the different configurations of networked network CCPs contribute to the different properties of the cascading failures.

scholarly journals Risk-Sharing and the Creation of Systemic Risk

2020 ◽  
Vol 13 (8) ◽  
pp. 183
Author(s):  
Viral V. Acharya ◽  
Aaditya M. Iyer ◽  
Rangarajan K. Sundaram
Keyword(s):  
At Risk ◽  
Systemic Risk ◽  
Risk Sharing ◽  
Lender Of Last Resort ◽  
Financial Innovations ◽  
Correlated Failures ◽  
Ex Post ◽  
The World ◽  
Ex Ante ◽  
Aggregate Risks

We address the paradox that financial innovations aimed at risk-sharing appear to have made the world riskier. Financial innovations facilitate hedging idiosyncratic risks among agents; however, aggregate risks can be hedged only with liquid assets. When risk-sharing is primitive, agents self-hedge and hold more liquid assets; this buffers aggregate risks, resulting in few correlated failures compared to when there is greater risk sharing. We apply this insight to build a model of a clearinghouse to show that as risk-sharing improves, aggregate liquidity falls but correlated failures rise. Public liquidity injections, for example, in the form of a lender-of-last-resort can reduce this systemic risk ex post, but induce lower ex-ante levels of private liquidity, which can in turn aggravate welfare costs from such injections.

Systemic Risk, Bank Capital, and Deposit Insurance Around the World

2014 ◽  
Author(s):  
Denefa Bostandzic ◽  
Matthias Pelster ◽  
Gregor N. F. Weiss
Keyword(s):  
Systemic Risk ◽  
Deposit Insurance ◽  
Bank Capital ◽  
The World

scholarly journals Variation margins, fires sales, and information-constrained optimality

2020 ◽  
Author(s):  
Bruno Biais ◽  
Florian Heider ◽  
Marie Hoerova
Keyword(s):  
Moral Hazard ◽  
Risk Sharing ◽  
Asset Prices ◽  
Counterparty Risk ◽  
Fire Sales ◽  
Risk Protection ◽  
Incentive Constraints

Abstract In order to share risk, protection buyers trade derivatives with protection sellers. Protection sellers’ actions affect the riskiness of their assets, which can create counterparty risk. Because these actions are unobservable, moral hazard limits risk sharing. To mitigate this problem, privately optimal derivative contracts involve variation margins. When margins are called, protection sellers must liquidate some assets, depressing asset prices. This tightens the incentive constraints of other protection sellers and reduces their ability to provide insurance. Despite this fire-sale externality, equilibrium is information-constrained efficient. Investors, who benefit from buying assets at fire-sale prices, optimally supply insurance against the risk of fire sales.

scholarly journals Forecast Hesitancy: Why are People Reluctant to Believe, Accept, or Respond to Various Weather, Water, and Climate Hazard-Related Forecasts?

2021 ◽  
Author(s):  
Michael H. Glantz ◽  
Gregory E. Pierce
Keyword(s):  
Vaccine Hesitancy ◽  
Social Phenomenon ◽  
Targeted Interventions ◽  
Personal Risk ◽  
Societal Value ◽  
The Social ◽  
The World ◽  
Near Term ◽  
Risk Reducing ◽  
Delayed Responses

AbstractCurrent discussions of the social phenomenon of “vaccine hesitancy” with regard to Covid-19 provide an opportunity to use hesitancy as a means to shift thinking about untimely and delayed responses to forecasts of hydrometeorological hazards. Hesitancy, that is, provides a paradigm through which such regrettably delayed responses to hydromet hazards might be better understood and effectively addressed. Without exaggeration, just about every hydromet event provides an example of how hesitancy hinders individual, community, and national government risk-reducing preventive and mitigative responses to forecasts of foreseeable, relatively near-term climate, water, or weather hazards. Reasons for such hesitancy (for vaccine and forecast use alike) include—among others—lack of trust in the science, lack of confidence in government, and persistent concern about the uncertainties that surround forecasting—both meteorological and public health. As such, a better understanding of the causes that lead to individual and group hesitancy can better inform hydromet forecasters and affected communities about ways in which beneficial actions in response to timely forecasts are often delayed. This better understanding will facilitate, where necessary, targeted interventions to enhance the societal value of forecasting by reducing this long-observed challenge of “forecast hesitancy.” First, this article focuses on incidents of “vaccine hesitancy” that, for various reasons, people around the world are even now experiencing with regard to several now-available, and confirmed efficacious, Covid-19 vaccines. Reports of such incidents of indecisiveness first increased dramatically over the first few months of 2021, despite the strong scientific confidence that vaccination would significantly lower personal risk of contracting as well as spreading the virus. After, the notion of forecast hesitancy with regard to hydrometeorological hazards is discussed.It’s not what you say, it’s what people hear.-Frank Luntz (2007)

UNWTO Basic Documents, Volume II – Staff Regulations and Staff Rules, 3rd edition

2021 ◽  
Keyword(s):  
Legal Framework ◽  
General Introduction ◽  
Financial Regulations ◽  
The World ◽  
Rules Of Procedure ◽  
World Tourism Organization ◽  
Tourism Organization ◽  
Financial Transactions

The UNWTO Basic Documents bring together three volumes which constitute the main legal framework of the World Tourism Organization (UNWTO) : Volume I – Statutes, Rules of Procedure, Agreements, provides a general introduction into the Organization’s legal framework, role and functions. It includes the Statutes and the Financing Rules in its Annex. These outline the Organization’s budget and contributions of Members. Volume II – Staff Rules and Staff Regulations, contains the framework for duties, rights and benefits of employees. Volume III – Financial Regulations and Rules, constitutes the framework governing the budgetary and financial transactions of the Organization. It comprises the Financial Regulations and the Detailed Financial Rules whereupon each chapter of the Financial Regulations has its corresponding chapter in the Detailed Financial Rules.

Prevailing Risk-Sharing Policies and Drivers of Disruption in the World of Work

2019 ◽  
pp. 27-60
Author(s):  
Truman Packard ◽  
Ugo Gentilini ◽  
Margaret Grosh ◽  
Philip O’Keefe ◽  
Robert Palacios ◽  
...  
Keyword(s):  
Risk Sharing ◽  
The World

The Asian Sports Market

2015 ◽  
pp. 97-113
Author(s):  
Metehan Igneci ◽  
Emel Kursunluoglu Yarimoglu
Keyword(s):  
Sustainable Development ◽  
Sports Marketing ◽  
The Other ◽  
Global Markets ◽  
Global Marketing ◽  
Financial Regulations ◽  
Entry Strategies ◽  
Football Clubs ◽  
The World

Football is considered the most spectated sport in the world. It cannot be considered as a mere entertainment of ninety minutes, but instead, it is an industry that connects many in one body. Due to difficult financial regulations and fierce competitiveness, Turkey, as a well-established but re-emerging football country, should create new routes to enhance their markets and find new financial supports. In order to achieve sustainable development and compete with the other big clubs of Europe, the football environment in Turkey should position itself globally and expand its operations. This chapter aims to adapt the entry strategies in global marketing to sports marketing. It reveals new marketing implementations for Turkish football clubs in Asian sports markets by defining the entry strategies of global markets and giving insights into the existing implementations of both Turkish clubs and other clubs in Asia.

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