kaal:claim:2748096-007

Post-LTCM counterparty credit risk management, in which regulators pressed banks to monitor and limit the leverage of their hedge fund clients, appears to have worked: the Amaranth failure produced no financial market repercussions.

The lack of financial market repercussions after the Amaranth failure seems to suggest that this approach has been successful.

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016), THE DEBATE ON HEDGE FUNDS' SYSTEMIC RISK, p. 4
https://ssrn.com/abstract=2748096 · source PDF

Wulf A. Kaal, Timothy A. Krause, Hedge Funds and Systemic Risk (2016). SSRN: https://ssrn.com/abstract=2748096

• post-1998 regulatory environment
• inference drawn from a single episode, the Amaranth failure

mechanismsupport: arguedrisk-and-incentivessystemic-riskcompliance

• supports kaal:claim:1806252-011 Banks' lending practices and counterparty credit risk management can curtail hedge funds' excessive risk takin...
• contests kaal:claim:1806252-028 A standard objection to indirect regulation is that counterparty credit risk management will not work effectiv...
• supports kaal:claim:1806252-029 Contesting the exclusivity objection, exclusivity of a banking relationship is not the only effective way to e...

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