As the market looks to the repo market (directly or indirectly via collateral transformation) to fund CCP collateral obligations, many are concerned that the reliance on repos is only relocating risk, which will be exacerbated in a time of market crisis. In an audio interview, DerivSource’s Julia Schieffer speaks to Prof. Craig Pirrong about this unintended consequence of central clearing on the repo market from a liquidity risk perspective. Tune in to hear the Streetwise Professor’s thoughts how the risks of collateral transformation, the role of the central banks in providing support mechanisms and how a change in the view of collateralization is necessary.
Also, please check out recent and related blog posts on collateral transformation via Streetwise Professor via the link below.
http://streetwiseprofessor.com/index.php?s=collateral+transformation
