G23 - Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional InvestorsReturn

As a regulatory answer to the crisis, financial instruments are increasingly forced to be cleared centrally even in the OTC markets; therefore, risk management of central clearinghouses has become a central issue. A key term of the regulation is a stress event; however, it is not specified in the legislation what should be meant under stress in the case of a clearinghouse. To find an objective stress indicator, we built up a micro-simulation model of a hypothetical clearinghouse operating on the US equity market between 2007 and 2015. Based on this, we developed a logit regression model to specify an appropriate stress indicator and we showed that our "tailor-made" stress index calibrated to the position of the clearinghouse performs significantly better than the usual market proxies for financial stress.