Economics, Econometrics and Finance
3 years ago

Counterparty Credit Limits Have Little Impact on Everyday Trading Prices.

Applied Mathematical Finance
Counterparty Credit Limits: The Impact of a Risk-Mitigation Measure on Everyday Trading
Martin Gould, Nikolaus Hautsch, Sam Howison, Mason A. Porter

Paper Summary

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Counterparty credit limits (CCLs) are used by financial institutions to limit their exposure to certain parties. A study on foreign exchange trading found that CCLs had minimal impact on most trades. However, in some cases, CCLs can significantly affect trading prices.