The fourth and fifth Alphaville posts are here and here. Normal service will be resumed here next week, but meanwhile thanks to the Alphaville team for a fun week of guest blogging, and to Alphaville readers for their great comments.
Clearing and Collateral, Publications
Very good blog series, thank you David!
What if the parrot is under a trading requirement and subject to mandatory clearing, how will Parrot Dealers (PDs) charge PVA, and will an end user exemption from clearing effect PVA?
Thank you Andreas.
Because the CM has full bilateral exposure to their client on cleared trades (the CM guarantees the client’s performance to the CCP, essentially), they have to charge full CVA. That said, there is likely little or no CVA if the client has agreed to daily margin. If the dealer is funding the client’s margin though it is a different story.
Thanks again David.
So I guess you can say that all that is achieved with mandatory trading requirements and pre-trade transparency rules is enhanced transparency for eligible counterparties, the end-users will continue to live in darkness with regards to how their quote is calculated, unless the end-users agree to maintain daily margin (or post a more than substantial initial margin).
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