Research and publications

Optimising The Compression Cycle: Algorithms For Multilateral Netting In OTC Derivatives Markets

This paper proposes and analyses a set of optimal compression algorithms for fungible derivatives. It finds that they all perform extremely well across a range of criteria and discusses their relat ...

Author(s) :

Dominic OKane

Summary :

This paper proposes and analyses a set of optimal compression algorithms for fungible derivatives. It finds that they all perform extremely well across a range of criteria and discusses their relative attributes. Although the focus is on the CDS market, the methods analysed here can be applied to other OTC derivative markets. If done optimally, compression is an effective counterparty risk mitigation technique that should be encouraged by regulators, especially as the benefits increase dramatically with the number of participants. 

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Type : Working paper
Date : 19/03/2014
Keywords :

Risk Management