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Quantitative Finance · Glossário

O que é Swap execution facility and trade compression?

Também chamado de: swap execution facility · trade compression

Definition 9.10 Markets II: Rates, FX and Credit · Capítulo 9 — Interest-Rate Swaps

A swap execution facility (SEF) is a regulated trading platform for swaps in the United States; swaps that have been declared available to trade must be executed on one. Trade compression is the tearing up of offsetting swaps between several counterparties, replacing them by fewer swaps with the same net risk, so as to reduce gross notional, the number of trades and the capital and margin they consume.

A compression cycle. Three dealers hold three identical swaps in a circle: each pays fixed on one and receives on another, so none has risk, yet all three hold gross notional, margin and capital against it. Compression tears the cycle up. Real cycles involve many participants and swaps that match only approximately; the service finds the largest set of tear-ups that leaves each participant’s risk within its tolerances.
Figure 9.4. A compression cycle. Three dealers hold three identical swaps in a circle: each pays fixed on one and receives on another, so none has risk, yet all three hold gross notional, margin and capital against it. Compression tears the cycle up. Real cycles involve many participants and swaps that match only approximately; the service finds the largest set of tear-ups that leaves each participant’s risk within its tolerances.
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