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How Does Novation Impact the Credit Exposure of Market Participants?

Reduces credit exposure by replacing the risk of an individual firm with the standardized, lower risk of the highly capitalized and regulated CCP.
Greeks.Live23.11.25

How Does Novation Impact the Credit Exposure of Market Participants?

Novation significantly reduces the credit exposure of market participants by replacing the risk of dealing with an individual firm with the risk of dealing with the highly capitalized and regulated CCP. This standardizes the counterparty risk to a single, robust entity, making it easier to manage and quantify.

How Does ‘Novation’ Fundamentally Change the Counterparty Risk Profile for a Trader?
How Is a CCP’s Default Fund Capitalized?
How Does ‘Novation’ Change the Legal Relationship between Trading Parties in a CCP Environment?
How Does the Clearing Process on a Regulated Exchange like CME Differ from an Offshore Crypto Exchange?

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