What Are the Key Risks a CCP Assumes by Guaranteeing Trades? ▴ Learn

What Are the Key Risks a CCP Assumes by Guaranteeing Trades?

The primary risk is 'credit risk,' the chance that a clearing member defaults on its obligations, leaving the CCP to cover the loss. Related to this is 'liquidity risk,' the need for the CCP to quickly access cash to meet settlement obligations before liquidating the defaulted position.

Finally, 'operational risk' from system failures or errors in margin calculation can also lead to significant financial loss.

In Options Trading, How Is the Need for Quick Governance Analogous to High Gamma Exposure?

What Is the Difference between Physical Settlement and Cash Settlement after a Credit Event?

Does the MTM Process Eliminate All Systemic Risk?

What Is the ‘Default Waterfall’ in CCP Risk Management?