A Redesign for Central Clearing

by Claudio Albanese of the Global Valuation, Ltd., and
Giacomo Pietronero of the Global Valuation, Ltd.

August 2011

Abstract: It is becoming increasingly evident that the ambitious push toward OTC clearing will require the establishment of a large market for margin lending. Should margin lenders engage also in maturity transformation turning long term counterparty risk into short dated exposures? Should they seek funding in overnight REPO markets or should they favor maturity matching constructs through securitization structures? These are the questions we shall try to answer.

JEL Classification: G1.

Keywords: Counterparty credit risk, margin lending, securitization.

Published in: CreditFlux, (August 2011), pp. 16-17.

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