medium · FRM Part 2 Credit Risk
A Central Counterparty (CCP) manages a member default. According to the standard 'default waterfall' architecture, which of the following is the LAST layer to absorb losses?
- The CCP's own pre-funded 'skin-in-the-game' capital contribution.
- The defaulting member's initial margin plus its own default fund contribution.
- The default fund contributions of the non-defaulting (surviving) members.
- The defaulting member's variation margin payments made to the CCP on that trading day.
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