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SUMMARY:Contagion in the CDS Market - H. Peyton Young\, James Meade Profes
 sor of Economics\, University of Oxford
DTSTART:20170309T130000Z
DTEND:20170309T140000Z
UID:TALK66460@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:Abstract\nThis paper analyzes counterparty exposures in the cr
 edit default swaps market and examines the impact of severe credit shocks 
 on the demand for variation margin\, which are the payments that counterpa
 rties make to o set price changes. We employ the Federal Reserve's Compreh
 ensive Capital Analysis and Review (CCAR) shocks and estimate their impact
  on the value of CDS contracts and the variation margin owed. Large and su
 dden demands for variation margin may exceed a firm's ability to pay\, lea
 ding some firms to delay or forego payments. These shortfalls can become a
 mplified through the network of exposures. Of particular importance in cle
 ared markets is the potential impact on the central counterparty clearing 
 house. Although it is a central node according to conventional measures of
  network centrality\, the CCP contributes less to contagion than do severa
 l peripheral firms that are large net sellers of CDS protection.\nDuring a
  credit shock these \nfirms can suffer large shortfalls that lead to furth
 er shortfalls for their counterparties\, amplifying the initial shock.\n
LOCATION:Room W4.03 Judge Business School
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