
Explanation:
The main source of liquidity risk for a Central Counterparty (CCP) is the obligation to process and manage varying margin payments, specifically variation margin. If clearing members experience significant market losses, the CCP must still meet its financial obligations and pay out variation margins to the profitable members, often intraday, creating massive immediate liquidity demands, especially during a default.
Ultimate access to all questions.
Q.96 Which of the following is the main source of liquidity risk in central counterparties?
A
High operating costs
B
Overinvestment in long-term assets
C
Varying margin payments
D
Overinvestment in derivatives assets
No comments yet.