Following the 2008 financial crisis, a new and mostly unstudied technique has become a central tenet of todayÂs financial markets: portfolio trade compression. Trade compression is a service offered by third party vendors that lowers a bankÂs gross notional exposures, while keeping net exposures the same. However, the effects of compression on systemic risk are unknown. In order to test the effectiveness of trade compression in risk mitigation, we compare the loss after default in markets with a variety of structures.
Worcester Polytechnic Institute
Major Qualifying Project
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