Introducing Mandatory Central Clearing of OTC Derivatives: An Assessment of Liquidity Requirement Associated with Initial Margin among Financial Institutions in the Nordics
Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
As a response to the social cost of systemic risk, and the negative externality associated with today’s derivative market, policy makers around the world have developed a regulatory framework to prevent financial crises from happening in the future. This study focuses on the liquidity requirement associated with mandatory central clearing among different financial institutions in the Nordics using interest rate swaps for hedging or speculative purposes. By assessing the required initial margin to be posted for the different institutions based on their trading pattern, our results show that insurance companies and public pension funds will face a higher need of liquidity per trade. Although they on average have to spare most liquidity per trade there are other factors that need to be taken into account when considering the final impact from initial margin, such as trade frequency and access to eligible collateral.
Place, publisher, year, edition, pages
IdentifiersURN: urn:nbn:se:uu:diva-197744OAI: oai:DiVA.org:uu-197744DiVA: diva2:614007
UppsokSocial and Behavioural Science, Law
Lyhagen, Johan, Professor
Ohlsson, Henry, Professor