Central counterparty exposure in stressed markets

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Time is valuable, particularly in stressed markets. Because central counterparties (CCPs) have become systemically important, we need to understand the dynamics of their exposure toward clearing members at high frequencies. We track such exposure and decompose it, yielding the following insights. The composition of CCP exposure is fundamentally different in the tails. At extreme levels or during rapid increases, there is elevated crowding. This is the result of clearing members all concentrating their positions on a single security or a particular portfolio, which is desirable if motivated by hedging but worrying if due to speculation.

Original languageEnglish
Pages (from-to)3596-3617
Number of pages22
JournalManagement Science
Issue number6
Early online date6 Aug 2020
Publication statusPublished - Jun 2021

Bibliographical note

Funding Information:
History: This paper was accepted by Gustavo Manso, finance. Funding: This work was supported by Nederlandse Organisatie voor Wetenschappelijk Onderzoek, Research Talent [Grant 406.17.556], and Vici [Grant 016.Vici.185.068.5562].

Publisher Copyright:
Copyright: © 2020 INFORMS

Copyright 2021 Elsevier B.V., All rights reserved.


  • Central counterparties (CCPs)
  • Crowding risk
  • Market stress

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