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What Is the Main Mechanism Used by the Clearing House to Mitigate Default Risk?

Margin requirements (Initial and Variation Margin) posted by both parties to cover potential losses.
Greeks.Live24.11.25

What Is the Main Mechanism Used by the Clearing House to Mitigate Default Risk?

The main mechanism is the use of margin requirements, specifically Initial Margin and Variation Margin (or Maintenance Margin). These funds are required to be posted by both counterparties to cover potential losses.

If a party incurs a loss, the clearing house uses the margin to cover it, preventing a chain of defaults.

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