Risks Caused by CCPs: Risk Faced by CCPS

3 important questions on Risks Caused by CCPs: Risk Faced by CCPS

Non default loss events?

- fraud
- operational (business disruption)
- legal (litigation or legal claims)
- Investment (from margins etc.)
Market disturbance??

What about model risk?

Model risk through marginging approaches? Yes!! Misspecifcation or pricing based on tail, volatility, complexity and wrong-way risk. Procyclicality!!! Margin multipliers... Penalise large and concentrated positions

Operation and legal risk?

a CCP can expose participants to additional risks, such as system failure and fraud.

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