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After completing this reading, you should be able to:
Define a central counterparty (CCP) and describe the mechanics of central clearing.
Explain the concept of novation under central clearing.
Define netting, multilateral offset, and compression and provide examples of each.
Describe the application and estimation of margin and default funds under central clearing.
Discuss the risks faced by a CCP and the ways it manages its exposures.
Provide examples of a loss waterfall.
Explain the different methods of managing the default of one or more members of a CCP.
Compare bilateral and central clearing.
Compare initial margin and default fund requirements for clearing members in relation to loss coverage, cost of clearing, and moral hazard.
Describe the advantages and disadvantages of central clearing.
Негізгі бет Central Clearing (FRM Part 2 - Book 2 - Credit Risk Measurement and Management - Ch 18)
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