Why are fee-to-collateral ratios so low?

Central Clearing;Collateral;Economics

Cheng, Wan-schwin ADuffee, Gregory R. ;

Johns Hopkins University

关键词: Central Clearing;    Collateral;    Economics;   

Others  :  https://jscholarship.library.jhu.edu/bitstream/handle/1774.2/39417/CHENG-THESIS-2015.pdf?sequence=1&isAllowed=y

瑞士|英语

来源: JOHNS HOPKINS DSpace Repository

【 摘 要 】

We develop a game-theoretic model of centralized clearing to analyze a clearinghouse;;s choice of transaction fee and collateral requirements. The clearinghouse;;s requirements affect not only the size and riskiness of her participating client base, but also the transaction fees charged to clients by her clearing member. We show that empirically observed low fee-to-collateral ratios can be explained as the equilibrium arising from strategic interactions between profit maximizing agents.We analytically characterize the equilibrium fee-to-collateral ratio and find that it depends on the relative riskiness of the contract (relative to the depth of clients;; private trading benefits). In particular, when the contract is very risky, so that participating clients are mostly speculators, the clearinghouse imposes a very high collateral requirement; when the contract is not risky, so that participating clients are mostly fundamental value traders, the clearinghouse imposes a very low collateral requirement.