Explanation:
The main reason why CCPs face liquidity risk has much to do with varying margin payments. These contractual payments keep on changing as positions change. If the CCP does not set aside enough funds to meet margin payments, it risks failing to fulfill its obligations to surviving members in a timely manner.
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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
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