The BIS have conducated a rigorous study using public metrics to look for a relationship between the amount of CCP capital at risk in the default waterfall, and the behaviour of CCP risk models. I won't spoil the surprise on the outcome, but this appears to be the first quantitative study into the possibility that if a CCP is likely to lose money, they operate more conservative risk models.

The paper covers:

• The default waterfall
• CCP profitability
• The hypotheses to be tested
• Public data, featuring ClarusFT
• Model risk management
• The role of 'skin in the game'
• The value of a franchise versus risk
• The conclusion

More information and the PDF plus the outcome

• https://www.bis.org/publ/work866.htm

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