Many jurisdictions identify margin procyclicality at central counterparties (CCPs) as a potential threat to financial stability. This paper studies the effect of less procyclical margin models on cleared volumes and risk taking in a stylized CCP. It finds that less procyclical margins do not...

Bank regulation presumes risks spill over more easily from large banks to the banking system thanvice versa. Yet, we document that risk transmission is stronger in the system-to-bank direction, because different bank activities affect the flow of risk differently in each direction. We term this...