E-Finance Lab Team

2017

Glaser, F.; Panz, S. (2017)

(Pro?)-Cyclicality of Collateral Haircuts and Systemic Illiquidity

In: 21st Annual European Conference of the Financial Management Association International (FMA Europe 2017); Lisbon, Portugal

Category: Proceedings

Abstract

Procyclicality of collateral haircuts and margins has become a widely proclaimed behavior and is currently discussed not only by academic literature but also by regulatory authorities in Europe. Procyclicality of haircuts is assumed to be a trigger of liquidity spirals due to its tightening effect of collateral portfolio values in times of market distress. However, empirical evidence on this topic is quite sparse and the discussions are primarily driven by insights derived from theoretical models. Nonetheless, oversight bodies are discussing macroprudential haircut add-ons in order to curb with the potential effects of procyclicality in distressed periods. Based on a unique data set provided by a large European Central Counterparty we construct a measure of systemic illiquidity of bond collateral and analyze the relationship between haircuts, the development of periods with explosive price behavior and systemic illiquidity. We estimate the noise of bond yields to measure systemic illiquidity with and without considering haircuts. We then apply an explosive roots bubble detection technique to identify irrational periods in each of these two time series and to a combination of both. Finally, we propose a quantitative trigger design for macroprudential haircut add-ons. Our results confirm that (1) bond collateral markets face irrational, i.e. bubble-like illiquidity during periods of systemic distress. The results indicate that (2) haircuts are not amplifying or increasing with systemic illiquidity. (3) The proposed haircut add-on mechanism exhibits desirable features to mitigate systemic illiquidity during lasting periods of distress.

Reference No.: 2017-138

Lewandowska, O.; Glaser, F. (2017)

The Recent Crises and Central Counterparty Risk Practices in the Light of Procyclicality: Empirical Evidence

In: Journal of Financial Market Infrastructures, Vol. 5, No. 3, pp. 1-24

Category: Publications in scientific journals [Find it]

Abstract

The mandatory central clearing for standardized over-the-counter derivatives, which was introduced by recent financial market reforms, makes central counterparties (CCPs) the most systemically important market participants. However, the theory suggests that, aside from their potential to reduce systemic risk, CCP risk management practices such as margining and collateral haircuts may exacerbate financialcycle fluctuations. Based on almost ten years of empirical data from a leading clearing house, we investigate if and to what extent the procyclical effects suggested by the literature can be statistically confirmed. Our results for the period encompassing the credit crisis and European sovereign debt crisis do not confirm the hypothesis from theoretical research that CCP risk practices are procyclical. Instead, they reveal only a low average level of conditional correlation between market stress and the margin/haircut requirement in the investigated period. Moreover, increases in CCP haircuts do not make clearing members (CMs) systematically drop the bonds with increased haircuts from their portfolios. Our results indicate that the effectiveness of regulatory action in the form of macroprudential haircut add-ons is doubtful, as the systematic overcollateralization of open positions by CMs, as observed in our data set, may already act as a countercyclical break.

Reference No.: 2017-116

Glaser, F.; Risius, M. (2017)

The Side Effects of Scrutinising Traders in Social Trading Platforms

In: LSE Business Review

Category: Miscellaneous [Find it]

Reference No.: 2017-109

Glaser, F.; Panz, S. (2017)

Cyclicality of Collateral Haircuts and Systemic Illiquidity

In: EFL Quarterly, 1/2017; Frankfurt am Main

Category: Miscellaneous [Find it]

Reference No.: 2017-98

Glaser, F. (2017)

Pervasive Decentralisation of Digital Infrastructures: A Framework for Blockchain enabled System and Use Case Analysis

In: Proceedings of the 50th Hawaii International Conference on System Sciences (HICSS 2017); Waikoloa Village, Hawaii, USA

Category: Proceedings [Find it]

Reference No.: 2017-1

2016

Glaser, F.; Panz, S. (2016)

(Pro?)-Cyclicality of Collateral Haircuts and Systemic Illiquidity

In: European Systemic Risk Board (ESRB) Working Paper Series, No 27 / October 2016

Category: Miscellaneous [Find it]

Abstract

Procyclicality of collateral haircuts and margins has become a widely proclaimed behavior and is currently discussed not only by academic literature but also by regulatory authorities in Europe. Procyclicality of haircuts is assumed to be a trigger of liquidity spirals due to its tightening effect of collateral portfolio values in times of market distress. However, empirical evidence on this topic is quite sparse and the discussions are primarily driven by insights derived from theoretical models. Nonetheless, oversight bodies are discussing macroprudential haircut add-ons in order to curb with the potential effects of procyclicality in distressed periods. Based on a unique data set provided by a large European Central Counterparty we construct a measure of systemic illiquidity of bond collaterals and analyze the relationship between haircuts, the development of periods with explosive behavior and systemic illiquidity. We estimate the noise of bond yields to measure systemic illiquidity with and without considering haircuts. We then apply an explosive roots bubble detection technique to identify irrational periods of each of these two time series and to a combination of both. Finally, we propose a quantitative trigger and design for macroprudential haircut add-ons. Our results confirm that (1) bond collateral markets face irrational, i.e. bubble-like illiquidity during periods of systemic distress. The results indicate that (2) haircuts are not amplifying or increasing with systemic illiquidity. (3) The proposed haircut add-on mechanism exhibits desirable features to mitigate systemic illiquidity during lasting periods of distress.

Reference No.: 2016-93

Glaser, F.; Risius, M. (2016)

Effects of Transparency. Analyzing Social Biases on Trader Performance in Social Trading

In: Journal of Information Technology (forthcoming)

Category: Publications in scientific journals [Find it]

Reference No.: 2016-92

Glaser, F.; Panz, S. (2016)

(Pro?)-Cyclicality of Collateral Haircuts and Systemic Illiquidity

In: 23rd Annual Meeting of the German Finance Association (DGF 2016); Bonn, Germany

Category: Proceedings

Abstract

Procyclicality of collateral haircuts and margins has become a widely proclaimed behavior and is currently discussed not only by academic literature but also by regulatory authorities in Europe. Procyclicality of haircuts is assumed to be a trigger of liquidity spirals due to its tightening effect of collateral portfolio values in times of market distress. However, empirical evidence on this topic is quite sparse and the discussions are primarily driven by insights derived from theoretical models. Nonetheless, oversight bodies are discussing macroprudential haircut add-ons in order to curb with the potential effects of procyclicality in distressed periods. Based on a unique data set provided by a large European Central Counterparty we construct a measure of systemic illiquidity of bond collaterals and analyze the relationship between haircuts, the development of periods with explosive behavior and systemic illiquidity. We estimate the noise of bond yields to measure systemic illiquidity with and without considering haircuts. We then apply an explosive roots bubble detection technique to identify irrational periods of each of these two time series and to a combination of both. Finally, we propose a quantitative trigger and design for macroprudential haircut add-ons. Our results confirm that (1) bond collateral markets face irrational, i.e. bubble-like illiquidity during periods of systemic distress. The results indicate that (2) haircuts are not amplifying or increasing with systemic illiquidity. (3) The proposed haircut add-on mechanism exhibits desirable features to mitigate systemic illiquidity during lasting periods of distress.

Reference No.: 2016-84

2015

Glaser, F.; Bezzenberger, L. (2015)

Beyond Cryptocurrencies - A Taxonomy of Decentralized Consensus Systems

In: Proceedings of the 23rd European Conference on Information Systems (ECIS 2015); Muenster, Germany

Category: Proceedings [Find it]

Reference No.: 2015-22

2014

Glaser, F.; Zimmermann, K.; Haferkorn, M.; Weber, M.; Siering, M. (2014)

Bitcoin – Asset or Currency? Revealing Users’ Hidden Intentions

In: EFL Quarterly, 3/2014; Frankfurt am Main

Category: Publications in journals

Reference No.: 2014-2138

Glaser, F.; Zimmermann, K.; Haferkorn, M.; Weber, M.; Siering, M. (2014)

Bitcoin - Asset or Currency? Revealing Users' Hidden Intentions

In: Proceedings of the 22nd European Conference on Information Systems (ECIS 2014); Tel Aviv, Israel

Category: Proceedings [Find it]

Reference No.: 2014-2116

Glaser, F.; Haferkorn, M.; Weber, M.; Zimmermann, K. (2014)

How to price a Digital Currency? Empirical Insights on the Influence of Media Coverage on the Bitcoin Bubble

In: Banking and Information Technology, Volume 15, Issue 1

Category: Publications in journals

Reference No.: 2014-2113

Glaser, F.; Haferkorn, M.; Weber, M.; Zimmermann, K. (2014)

How to price a digital currency? Empirical insights on the influence of media coverage on the Bitcoin bubble

In: Proceedings of the Multikonferenz Wirtschaftsinformatik (MKWI); Paderborn, Germany

Category: Proceedings

Reference No.: 2014-2084