What Role Does Custody Play in Mitigating Risk for Large OTC Crypto Trades? ⎊ Path

What Role Does Custody Play in Mitigating Risk for Large OTC Crypto Trades?

Custody plays a critical role by ensuring the safety and availability of the assets involved in the trade. By using a qualified, independent third-party custodian, both the buyer and seller can mitigate counterparty risk.

The custodian holds the assets in escrow until the trade is confirmed and settled, ensuring the simultaneous exchange of assets (Delivery Versus Payment or DVP).

What Role Does a Central Counterparty Clearing House (CCP) Play in Ensuring DVP?

How Does the Concept of “Delivery versus Payment” (DvP) Relate to Atomic Settlement?

What Are the Key Operational Steps for a Bilateral OTC DVP Trade?

What Is Delivery versus Payment (DVP) and How Is It Applied in Digital Asset RFQ Trades?

What Is the Role of an Escrow Agent in Facilitating DVP?

What Is Delivery versus Payment (DVP) and How Is It Applied to Crypto Derivatives?

How Do Escrow Services Function in a Crypto OTC Trade?

What Is “Principal Risk” and Why Is DVP Essential to Mitigate It?

Glossar

Mitigating Risk

Technique ⎊ Mitigating Risk in crypto derivatives involves deploying a suite of defensive strategies, including over-collateralization, dynamic margin adjustments, and portfolio diversification across uncorrelated assets.