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Fundamental questions on central counterparties: A review of the literature
Author(s) -
Berndsen Ron
Publication year - 2021
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.22260
Subject(s) - clearing , derivative (finance) , derivatives market , counterparty , business , safer , financial crisis , credit risk , financial system , economics , finance , futures contract , keynesian economics , computer science , computer security
Central counterparties (CCPs) function as financial infrastructures for capital markets in derivatives. They are designed to reduce aggregate counterparty credit risk. Although CCPs have existed for well over a century, they have only gained prominence after the Great Financial Crisis compelled the G20 to implement the mandatory clearing policy to make over‐the‐counter derivative transactions safer. This has led to a boom in CCP literature, 60% of which has been published in the last 5 years. This article provides a review of the literature on derivative CCPs focusing on some fundamental topics regarding the raison d'être, resilience, and governance of the CCP.