We develop a model of dealer intermediation in bond markets that takes account of how changing regulatory requirements for banks since the financial crisis, in particular, the introduction of minimum leverage ratio requirements, affect the cost and ability of dealer banks to provide...

We construct a heterogeneous agent-based model of the corporate bond market capturing the interaction of market maker behaviour, fund trading strategies, and cash allocation by investors in funds to study feedback effects and the impact of market changes. The model parameters are calibrated...

Collateral plays an important role in supporting a vast range of transactions that help ensure the efficient functioning of the financial system. But collateral markets also have the potential to exacerbate risks to financial stability, not least given that during periods of market stress demand...

We present new evidence on the structure of interbank connections in key markets: derivatives, marketable securities, repo, unsecured lending and secured lending. Taken together, these markets comprise two networks: a network of interbank exposures and a network of interbank funding. Network...

Large-value payment systems (LVPS) often have a tiered structure where only a limited number of banks have direct access to these systems and every other institution accesses the system through agency arrangements with the direct participants. As such, a high degree of tiering is often perceived...

We analyze the role of auctions in managing the default of a clearing member in a generic central counterparty (CCP). We first consider three established alternative sealed bid auction formats in which clearing members simultaneously submit bids for a defaulting clearing member's portfolio:...

As part of the post-crisis regulatory reform, many interest-rate derivative transactions are required to be centrally cleared. Nevertheless, the treatment of this type of transaction under the leverage ratio (LR) requirement does not allow for the use of initial margin to reduce the exposure,...

In this paper, we analyse the network of exposures constructed by using the UK trade repository data for three different categories of contracts: interest rate, credit, and foreign exchange derivatives. We study how liquidity shocks related to variation margins propagate across the network and...

We study the impact of common asset holdings across different financial sectors on financial stability. In particular, we model indirect contagion via fire sales across UK banks and non-banks. Fire sales are triggered by different responses to a financial shock: banks and non unit-linked...

We investigate whether margin calls on derivative counterparties could exceed their available liquid assets and, by preventing immediate payment of the calls, spread such liquidity shortfalls through the market. Using trade repository data on derivative portfolios, we simulate variation margin...