We study solvency contagion risk in the UK banking system from 2008 to 2015. We develop a model that only accounts for losses transmitted after banks default, but also for losses due to the fact that creditors revalue their exposures when probabilities of default of their counterparties change....

We explore the impact of central clearing on the demand for collateral arising from variation margin calls in the derivatives market. We find that the aggregate demand for collateral is not necessarily minimal when all contracts are centrally cleared. Hence, at least in this respect, increasing...