Gao, Haotian;
(2023)
Payment Networks in the Presence of a Central Counterparty Clearing House.
Doctoral thesis (Ph.D), UCL (University College London).
Preview |
Text
Gao_10172006_thesis.pdf Download (3MB) | Preview |
Abstract
The establishment of Central Counterparty Clearing houses (CCPs) is a way to reduce the impact of counterparty risk, therefore strengthening the whole financial system. In this thesis, I focus on liquidity shortfalls arising from the failure to meet variation margin calls with the presence of a CCP. I generate several random network models as hypothetical interbank networks, then use numerical simulation to reach the results. • Using the Erdos-Renyi network with independent exposures, I find that the shortfall is not necessarily minimum when all contracts are centrally cleared. Instead, the optimal value of shortfall exists with a combination of centrally and bilaterally clear. In this point of view, increasing the percentage of centrally cleared contracts is not always optimal. • When using the Erdos-Renyi network with perfectly correlated exposures, I prove stronger results using mathematical derivation that the aggregate shortfall is decreasing with the fraction of centrally cleared contracts, indicating that the second-step netting provided by the CCP betters off payment efficiency. In this set-up, shortfall can never increase as percentage increases, and it only starts to decrease after a certain fraction of centrally cleared contracts is achieved. • For power-law degree distributed networks and networks with non-neutral assortativity, I find similar relationships but higher value of shortfalls for both scale-free networks and disassortative networks. These properties provide a closer match to real interbank networks, therefore further enhanced my result.
| Type: | Thesis (Doctoral) |
|---|---|
| Qualification: | Ph.D |
| Title: | Payment Networks in the Presence of a Central Counterparty Clearing House |
| Open access status: | An open access version is available from UCL Discovery |
| Language: | English |
| Additional information: | Copyright © The Author 2023. Original content in this thesis is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International (CC BY-NC 4.0) Licence (https://creativecommons.org/licenses/by-nc/4.0/). Any third-party copyright material present remains the property of its respective owner(s) and is licensed under its existing terms. Access may initially be restricted at the author’s request. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL BEAMS UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10172006 |
Loading...
Loading...Loading...Loading...Archive Staff Only
 |
View Item |
