Stress Testing and CCPs - Are We Missing the Point?
Catalyst's Stephen Loosely questions if clearers and clearing houses are going far enough with stress testing and suggests a wider testing of assets and liabilities is crucial to effect risk management.
Clearing houses stress test the cleared liabilities of their members to protect themselves against extreme losses in a default. Regulations direct what stress testing should provide for. On the surface, it looks like we’re all safe. But we’re missing something big.
Stephen Loosley is an experienced senior Risk Management specialist with deep expertise working in CCPs on OTC derivative products. Prior to joining Catalyst as a consultant, he held the role of Head of Middle Office (Risk & Operations) for SwapClear at LCH.Clearnet, where he was a key participant in largest OTC Default in history – Lehman Brothers Special Financing, hedge and auction of $9trn cleared notional interest rate swap portfolio.
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