Share these talks and lectures with your colleagues
Invite colleaguesPractice paper
Evaluating risk and stress-testing challenges for central counterparties
Journal of Securities Operations & Custody,
15
(2),
123-133
(2023)
Abstract
This paper discusses the types of challenges that stakeholders face in evaluating risk and margin models for central counterparties (CCP). Two important tools to evaluate the adequacy of CCP resources to cover potential future exposures are back-testing and stress-testing. The paper discusses challenges when designing and analysing back-tests, including the use of unit tests and the inclusion of add-ons. The design and specificities of supervisory stress-testing are covered with a particular focus on liquidity and concentration risk.
Keywords: back-testing; stress-testing; margin model; statistical performance; add-ons; model risk
The full article is available to subscribers to the journal.
Author's Biography
Franck Viollet is Senior Risk Expert at the European Securities and Markets Authority (ESMA) in Paris. He holds a degree in engineering from the École Polytechnique and is a statistics and economics graduate of ENSAE (École Nationale de la Statistique et de l'Administration Économique). Franck started his career as a quantitative analyst, with positions in equity, x-value adjustment (XVA) and cross-asset derivatives. He joined ESMA in 2016, where he works on CCP prudential issues. As part of a team, Franck has been actively involved in the design and execution of the regular ESMA CCP stress tests, as well as in the analysis of the stress testing results.
