Study Notes: Central Clearing

Topic Progress:

Chapter 6. Central Clearing Study Notes will cover the following learning objectives:

* Provide examples of the mechanics of a central counterparty (CCP).
* Describe the role of CCPs and distinguish between bilateral and centralized clearing.
* Describe advantages and disadvantages of central clearing of OTC derivatives.
* Explain regulatory initiatives for the OTC derivatives market and their impact on central clearing.
* Compare margin requirements in centrally cleared and bilateral markets, and explain how margin can mitigate risk.
* Compare and contrast bilateral markets to the use of novation and netting.
* Assess the impact of central clearing on the broader financial markets.
* Identify and explain the types of risks faced by CCPs.
* Identify and distinguish between the risks to clearing members as well as non-members.

After reviewing the notes, you will be able to apply what you learned with practice questions.

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