Postdoc Associate, Tarik Roukny, investigates how the size of financial markets can be reduced while satisfying individual net positions and trading relationships. In this LIDS & Stats Tea, Tarik discusses with members of the Laboratory the feasibility, efficiency criteria and topological characteristics of compression, highlighting the key role of intermediaries for excess levels and compression efficiency.

Applying the studied financial compression framework to a unique and comprehensive transaction-level dataset on derivatives that includes all firms based in the European Union, he observes that on average 75% of market gross notional is eligible for compression.