Empirical evidence on adverse feedback loop between asset price movements and position liquidation, and the efficacy of anti-procyclicality measures - SLIDES

Presentation slides- WFE ClearCCP margin procyclicality has been a key focus area for regulators since post Renewed interest of industry and regulators after Covid-- GFC reforms. A CCP should appropriately address procyclicality in its margin arrangements. In this context, procyclicality typically refers to changes in risk management practices that are positively correlated with market, business, or credit cycle fluctuations and that may cause or exacerbate financial instability” (CPMI, 2012).We utilize a quasinatural experiment made possible by unique design of Indian derivatives market and recent strengthening of anti spiral and effectiveness of anti-- procyclicality measures to find empirical evidence for the liquidity procyclicality measures.