medium · Frm Part 2 Credit Risk
A Central Counterparty (CCP) manages member defaults using a structured waterfall.
According to standard practice, in which order are the following resources consumed to cover losses from a member's default?
- Surviving Members' Default Fund rightarrow CCP's Equity rightarrow Defaulter's Initial Margin.
- CCP's Equity rightarrow Defaulter's Initial Margin rightarrow Defaulter's Default Fund.
- Defaulter's Initial Margin rightarrow Defaulter's Default Fund Contribution rightarrow CCP's Equity rightarrow Surviving Members' Default Fund Contributions.
- Defaulter's Initial Margin rightarrow Surviving Members' Default Fund rightarrow Defaulter's Default Fund.
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