How Do Margin Requirements Help Prevent Systemic Risk in Derivatives Markets? ▴ Learn

How Do Margin Requirements Help Prevent Systemic Risk in Derivatives Markets?

Margin requirements act as a financial buffer against default. By ensuring that every participant posts collateral (IM) and settles daily losses (VM), margin limits the loss exposure of the CCP.

This mechanism prevents a single participant's failure from triggering a cascade of defaults throughout the financial system, thus safeguarding overall market stability.

How Does the Lack of a Traditional CCP in Many DeFi Derivatives Protocols Increase Protocol Risk?

How Does a Central Counterparty (CCP) Mitigate Counterparty Risk?

How Does “Herding Behavior” in Financial Markets Amplify Systemic Risk?

What Is the Role of the CCP’S’default Fund’ in Managing Systemic Risk?