How Does the CCP’s Default Management Process Maintain Market Integrity?
The CCP's default management process is a pre-defined set of procedures to be executed immediately upon a member's failure. It involves immediately liquidating or hedging the defaulter's portfolio in an orderly manner to minimize market disruption.
By quickly containing the loss and preventing contagion, the process ensures that the non-defaulting members and the broader market can continue to function normally.
Glossar
Default Management
Mitigation ⎊ Default Management within cryptocurrency, options trading, and financial derivatives centers on proactive strategies to minimize counterparty risk and systemic exposure.
Default Management Process
Framework ⎊ Within cryptocurrency derivatives and financial options, a robust Default Management Process (DMP) necessitates a layered framework integrating risk assessment, collateralization protocols, and liquidation mechanisms.
Central Clearing Counterparty
Mitigation ⎊ Central Clearing Counterparties (CCPs) in cryptocurrency derivatives function as intermediaries, interposing themselves between counterparties to reduce systemic risk inherent in bilateral trading.