Capital Requirements for Over-the-Counter Derivatives Central Counterparties

47 Pages Posted: 13 Feb 2013

See all articles by Jay Surti

Jay Surti

International Monetary Fund (IMF)

Li Lin


Multiple version iconThere are 2 versions of this paper

Date Written: January 8, 2013


The central counterparties dominating the market for the clearing of over-the-counter interest rate and credit derivatives are globally systemic. Employing methodologies similar to the calculation of banks’ capital requirements against trading book exposures, this paper assesses the sensitivity of central counterparties’ required risk buffers, or capital requirements, to a range of model inputs. We find them to be highly sensitive to whether key model parameters are calibrated on a point-in-time versus stress-period basis, whether the risk tolerance metric adequately captures tail events, and the ability — or lack thereof — to define exposures on the basis of netting sets spanning multiple risk factors. Our results suggest that there are considerable benefits from having prudential authorities adopt a more prescriptive approach for central counterparties’ risk buffers, in line with recent enhancements to the capital regime for banks.

Keywords: Central counterparties, capital, initial margin, default fund, G-14 dealers

JEL Classification: C53, C58, G23, G24, G28

Suggested Citation

Surti, Jay and Lin, Li, Capital Requirements for Over-the-Counter Derivatives Central Counterparties (January 8, 2013). IMF Working Paper No. 13/3, Available at SSRN: or

Jay Surti (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Li Lin

Independent ( email )

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