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Abstract This
paper derives a general framework for collateral risk control determination in repurchase transactions
or repos. The objective is to treat consistently heterogeneous collateral so that the collateral taker
has a similar risk exposure whatever the collateral pledged. The framework measures the level of risk
with the probability of incurring a loss higher than a pre-specified level given two well known parameters
used to manage the intrinsic risk of collateral: marking to market and haircuts. It allows for the analysis
in a self contained closed form of the way in which different relevant factors interact in the risk
control of collateral (e.g.marking to market frequency, level of volatility of interest rates, time
to capture and liquidity risk, probability of default of counterparty, etc.). The framework, which combines
the recent theoretical literature on credit and interest risk, provides an alternative quantifiable and
objective approach to the existing more ad-hoc rule-based methods used in haircut determination.
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22.05.2013 - Zurich SFI Breakfast Seminar with Michael V. Dunn The impact of speculators in the agricultural futures markets and the resulting price of agricultural products
