medium · FRM Part 2 Credit Risk
The 'Basel Default Waterfall' for Central Counterparties (CCPs) dictates the order in which resources are used to cover a clearing member's default.
After the defaulting member's own initial margin is exhausted, what is typically the next layer of protection?
- The default fund contributions of non-defaulting members.
- The defaulting member's contribution to the default (guaranty) fund.
- The CCP's own equity capital, commonly referred to as skin-in-the-game.
- An emergency, direct bailout provided by the relevant central bank authority.
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