Hector Perez Saiz is a senior analyst in the Financial Stability Department at the Bank of Canada. He is a microeconomist whose primary research interests center on the regulation and degree of competition of financial markets. Specific topics include clearing in over-the-counter markets, access to liquidity facilities, and firm expansion. Hector Perez Saiz received his PhD in economics from the University of Chicago.
This paper provides a framework to compare linked and unlinked CCP configurations in terms of total netting achieved by market participants and the total system default exposures that exist between participants and CCPs.
: Payment clearing and settlement systemsCentral counterparties can make over-the-counter markets more resilient and reduce systemic risk by mitigating and managing counterparty credit risk. These benefits are maximized when access to central counterparties is available to a wide range of market participants. In an over-the-counter market, there is an important trade-off between risk and competition. A model of an over-the-counter market shows how risk and competition could be influenced by the incentives of market participants as they move to central clearing. In a centrally cleared market, there may be less risk when participation is high. This helps to explain why regulators have put in place requirements for fair, open and risk-based access criteria.
: Financial markets; Financial system regulation and policies; Market structure and pricingWe model the behavior of dealers in Over-the-Counter (OTC) derivatives markets where a small number of dealers trade with a continuum of heterogeneous clients (hedgers). Imperfect competition and (endogenous) default induce a familiar trade-off between competition and risk.
: Financial markets; Financial stability; Financial system regulation and policiesIn many industries, firms usually have two choices when expanding into new markets: They can either build a new plant (greenfield entry) or they can acquire an existing incumbent. In the U.S. cement industry, the comparative advantage (e.g., TFP or size) of entrants versus incumbents and regulatory entry barriers are important factors that determine the means of expansion.
: Econometric and statistical methods; Market structure and pricing; Productivity
