How Is Collateral Risk Managed in Traditional Options Clearing Houses?

Traditional options clearing houses (CCPs) manage collateral risk through a multi-layered system. They require initial margin, calculate daily mark-to-market valuations, and enforce variation margin calls.

They also use a default fund contributed by all members. This centralized, highly regulated system ensures that even if a member defaults, the CCP has sufficient collateral to guarantee the settlement of all open contracts.