How Does a CCP’s Guarantee Fund Mitigate Systemic Risk?

A CCP's guarantee fund (or default fund) is a mutualized pool of capital contributed by all clearing members, designed to absorb losses from a defaulting member that exceed their posted margin and the CCP's own capital. By providing a deep financial buffer, the fund ensures that the CCP can continue to operate and guarantee all remaining trades, preventing the default from cascading into the broader financial system.