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Mathematical Finance and Probability Seminars

Modeling wealth dynamics under central clearing

Tuesday, March 28, 2017 at 11:45am - 12:45pm

Allen Cheng, Columbia University

 Allen Cheng, Columbia University: We provide a flexible, scalable, and analytically tractable model for participants of a centrally cleared market. By exploiting real-world features of clearing practices, we providing a unifying framework that models,  jointly and explicitly, financial institutions' business operations, trading activities, allocation of capital, and the resulting wealth dynamics. We find that (i) trading is more capital intensive for large clearing members, (ii) incomplete information can significantly distort measured concentration, (iii) market collateral demand is positively correlated with wealth concentration,  (iv) wealth concentration has the inherent tendency to build up,  (v) there is a potential tradeoff between wealth and business diversity, and  (vi) a concentration charge on collateralizing margins can be used to steer concentration.
Location   Hill 705

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Mathematical Finance Master's Program

Department of Mathematics, Hill 348
Hill Center for Mathematical Sciences
Rutgers, The State University of New Jersey
110 Frelinghuysen Road
Piscataway, NJ 08854-8019

Email: finmath (at)
Phone: +1.848.445.3920
Fax: +1.732.445.5530