Do Security Prices Rise or Fall When Margins Are Raised?

Abstract : When repo margins are raised by a central clearing counterparty (CCP), the impact on security prices depends on whether the market is 'long' or 'short'. As both the long and the short must post margins, the price impact depends on which side is more leveraged: traders long in the security or those short-selling it. If a raised margin forces more position unwind from the long than from the short, the price will go down to clear the market. However, if short positions are more hit then the long ones, a raised haircut leads to a higher security price!
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Contributor : Jean-Marc Bottazzi <>
Submitted on : Saturday, November 25, 2017 - 4:25:55 AM
Last modification on : Tuesday, January 30, 2018 - 5:50:04 PM
Long-term archiving on : Monday, February 26, 2018 - 12:24:23 PM

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Jean-Marc Bottazzi, Mário Páscoa, Guillermo Ramírez. Do Security Prices Rise or Fall When Margins Are Raised?. 2017. ⟨hal-01648215⟩

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