Yuriy GrossmanPublished in:
Global Markets and Financial Engineering (Russian version)
– Volume 3, Number 2 (April-June, 2016)

JEL classification: D81, G15, G18

Keywords: central counterparty, clearing, credit default swap, credit derivative, credit event, credit exposure, default, derivative security, security deposit, systemic risk


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Abstract:

This article is dedicated to the issue of the solution of the problems of systemic risks from global perspective by means of regulation and control on the financial markets, in particular, on the international over-the-counter market of derivative financial instruments. The article lists the main factors of the appearance of systemic risks, demonstrates the examples of their realization, as well as the examples of the laws adopted by the USA and EU for mitigation of such risks. The author has also pointed out the problems of the world financial system that still haven’t been solved by the regulators and the systemic risks resulting from these problems. For the solution of these problems the author has proposed a set of possible solutions and identified the conditions that are obligatory for the solution thereof.

Highlights:

► the globalization process facilitated the appearance of a new kind of risks which a company cannot handle without the state’s aid
► for research of the systemic risks it is necessary to turn attention to the market of the derivative financial instruments (derivative securities)
► in spite of the fact that stock derivative securities are traded all over the world in considerably larger amounts than OTC derivatives, the latter are accompanied by greater risks
► since there have been no demands towards credit default swap salesmen, the collapse of a number of the largest American financial organizations triggered a wave of bankruptcies all over the world; thus, the systemic risk was realized in the form of the world financial crisis of 2008–2009
► in spite of serious governmental measures to mitigate the consequences of the crisis the problem of forecasting and decreasing global systemic risks is ever more pressing; the problems of the world financial system constitute global systemic risks
► regulatory requirements are to cover not only the USA and European Union, but also all other countries participating in the international trade of financial tools
► the introduction of strict requirements to the collaterals of transactions with interest rate derivatives and foreign exchange derivatives may become one of the most important steps towards the decrease of systemic risks that will enable to solve the problem of obligations concentration as for derivative financial instruments, the problem of credit risks, the problem of trade of venturous instrument types

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