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Economists examine risks of IM in OTC derivatives clearing

Economists Samim Ghamami, Paul Glasserman and Peyton Young have been working on a network model to examine how initial margin requirements in over-the-counter derivatives trading can affect contagion. Ghamami writes that their results have found "collateral in the form of initial margin is not guaranteed to improve financial stability. In fact, committing collateral to counterparties in excess of current payment obligations can increase risks to financial stability."

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