The Economist: Finance and economics articles summarised (31 May 2019)

Clearing houses
There are $639trn worth of derivatives globally, 68% are centrally cleared. OTC derivatives amount to $544trn, of which 62% are centrally cleared, see chart below, up from 26% pre-crisis. Central clearing helps. If a hedge fund buys a 1 year option on Apple shares through one bank then sells it to another bank, the exposure looks open to each bank but through an exchange all parties know that it is not. What if . . .

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