Central Clearing, xVA, CCR Stress, and Securitization
Free GARP FRM Part II lesson in Credit Risk Measurement and Management. 23 min read, ~3,394 words.
Central counterparty (CCP) novates trades, the original counterparty is replaced by the CCP. Multilateral netting and a default waterfall replace bilateral exposure with mutualized risk. Loss waterfall: defaulter's IM → defaulter's default fund → CCP capital → surviving members' default fund → assessment rights. Each layer absorbs in order. xVA...
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- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
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