What Is the Difference between Gross and Net Exposure?
Gross exposure is the total value of all outstanding contracts or obligations without considering any offsetting positions. Net exposure is the remaining value after all offsetting positions and obligations have been cancelled out through netting.
CCPs manage net exposure, which is significantly lower than gross exposure.
Glossar
Exposure
Volatility ⎊ Exposure, within cryptocurrency and derivatives markets, represents the degree to which an instrument’s value can fluctuate due to shifts in underlying asset prices or implied volatility surfaces.
Reducing Gross Exposure
Reduction ⎊ This is the practice, often facilitated by central clearing, of offsetting long and short derivative positions across various counterparties to lower the total notional exposure that needs to be collateralized and settled.
Net Exposure
Quantification ⎊ Net exposure, within cryptocurrency and derivatives markets, represents the aggregated directional risk stemming from all positions held by an entity, calculated as the difference between long and short exposures, adjusted for delta where applicable.