Central Counterparties: Mandatory Central Clearing and Initial Margin Requirements for OTC Derivatives (The Wiley Finance Series) Hardcover – Illustrated, July 21, 2014

Dr Jon Gregory’s new book summarizes and digests the developments in over-the-counter (OTC) derivative clearing since the 2007 global financial crisis. The book introduces the concepts of bilateral trading, counterparty risk, and margining, and in doing so presents a clear picture of the industry’s recent evolution towards central clearing. Gregory appears to have been very careful to present an unbiased assessment of central clearing, reminding the reader that it far from represents a new ‘panacea’, but like the regimes it replaces, is fraught with potential shortfalls. The book also does well to go beyond product and jurisdictional boundaries, discussing the implications of regulatory differences between the major markets in Europe and the USA, and raising questions of potential regulatory arbitrage.The book is extremely well written and presents background to many of the underlying concepts clearly and concisely. The level of analysis is good, but focuses on presenting the facts and raising questions in the readers mind. Unlike more academic assessments of central clearing, Gregory presents a far more considered view, drawn I’m sure from his deep first hand experience of some of the world’s largest credit trading desks.

Topic areas selected are relevant and explored sufficiently to gain a threshold level of understanding without delving too far into the weeds that are likely to be distracting and unnecessary to the target audience

This is a clearly written book on the world of CCPs. It is timely and accurate in its descriptions.Quite a few lessons from the Lehman's bankruptcy are highlighted such as the `flip provision' in certain legal documents, the management of Lehman's portfolio following bankruptcy etc.Exposures to default funds is a big issue right now for SIFIs and the book dedicates several chapters to default funds and loss allocation methods.Capital calculations for CCPs is covered in chapter 10 - this is useful. I think an example using an example portfolio would add value.Also a chapter on stress testing requirements for CCPs and clearing members would be useful.Chapter 14, `Risks Caused by CCPs' is a must read. It is excellent.If you want a book on understanding the practice and theory of CCPs, I would recommend this book.The author has made the effort to make each chapter understandable.