TY  - JOUR
AU  - Acharya, Viral V
TI  - A Transparency Standard for Derivatives
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17558
PY  - 2011
Y2  - November 2011
DO  - 10.3386/w17558
UR  - http://www.nber.org/papers/w17558
L1  - http://www.nber.org/papers/w17558.pdf
N1  - Author contact info:
Viral V. Acharya
Stern School of Business
New York University
44 West 4th Street, Suite 9-65
New York, NY 10012
Tel: 212/998-0354
Fax: 212 995 4233
E-Mail: vacharya@stern.nyu.edu
M1  - published as Viral V. Acharya. "A Transparency Standard for Derivatives," in Markus Brunnermeier and Arvind Krishnamurthy, editors, "Risk Topography: Systemic Risk and Macro Modeling" University of Chicago Press (2014)

AB  - Derivatives exposures across large financial institutions often contribute to - if not necessarily create - systemic risk. Current reporting standards for derivatives exposures are nevertheless inadequate for assessing these systemic risk contributions. In this paper, I explain how a transparency standard, in contrast to the current standard, would facilitate such risk analysis. I also demonstrate that such a standard is implementable by providing examples of existing disclosures from large dealer firms in their quarterly filings. These disclosures often contain useful firm-level data on derivatives, but due to a lack of standardization, they cannot be aggregated to assess the risk to the system. I highlight the important contribution that reporting the "margin coverage ratio" (MCR), namely the ratio of a derivatives dealer's cash (or liquidity, more broadly) to its contingent collateral or margin calls in case of a significant downgrade of its credit quality, could make toward assessing systemic risk contributions.
ER  -