Tag Info

Hot answers tagged

8

The short answer is that it depends ;-) The long answer is complicated because it is a complicated topic. Disclaimers: I am not a lawyer (feel free to comment if I have overlooked anything) I believe the information below to be fairly standard, but counterparty risk is eventually driven by contracts and has to be envisaged on a case by case basis Cash is ...


8

Options are actually some of the least susceptible securities to the adverse impact of counterparty risk. I refer to listed options, such as those cleared through the OCC (Options Commodity Clearinghouse) in Chicago, IL. The OCC is a true central clearing counterparty (CCC) because it bears all default risk, by distributing it evenly among its members. The ...


6

Keep in mind that most futures, equity, and index options, at least, are traded on exchanges where the counterparty risk is so tiny as to be negligible. In general, adding extra variables like this fails to invalidate the model. For example, the fact that interest rates or volatilities are not constant just ends up leading to an extended model with extra ...


4

There is a good article in Seeking Alpha but if you did a Google Search you probably found it already. Some ETF's work through swaps with a counterpart, but you will never know who the counter-part is. As you said it depends on the type of ETF, with a UCITS ETF you're not supposed to have a big counter-part risk as you own the underlyings, when it's ...


2

I recommend you read the Financial Stability Board report. FT Alphaville provides a nice summary of the report with plenty of links to investigate further.



Only top voted, non community-wiki answers of a minimum length are eligible