What are Central Counterparties (CCPs)?

What are Central Counterparties (CCPs)?

Central Counterparties, or CCPs, reduce settlement and credit risk and costs by netting transactions between multiple counterparties. Peter explains how and why CCPs perform this function.
Overview

Central Counterparties (CCPs) are an essential entity for derivative trades in certain markets. They are successful in reducing risk, but can constitute a systemic risk under extreme conditions.

Key learning objectives:

  • Define CCPs and novation

  • Explain the significance of CCPs in the derivatives market

  • List examples of major CCPs

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