Correct answer: A. Bifurcations

According to Gregory, several items listed in the choices are actually advantages of CCPs:

• Market liquidity
• Loss mutualization
• Default management

A key disadvantage is bifurcation.

Why bifurcation is a disadvantage

CCPs typically clear standardized instruments (for example, plain vanilla interest rate swaps) but may not clear exotic instruments. This can split a portfolio into:

• positions that are cleared through the CCP, and
• positions that remain outside the CCP

That separation can create operational, collateral, and hedging inefficiencies.

Therefore, bifurcations is the potential disadvantage.