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Does Novation Completely Eliminate All Forms of Risk for a Market Participant?

Novation removes counterparty credit risk but leaves market, liquidity, and operational risks intact for the trader.
Greeks.Live22.11.25

Does Novation Completely Eliminate All Forms of Risk for a Market Participant?

No, novation eliminates counterparty credit risk, but it does not remove market risk, liquidity risk, or operational risk. Market risk, the risk of the underlying asset price moving against the position, remains the primary concern.

Liquidity risk is low but not zero, and operational risks related to trading systems and processes still exist.

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