hard · Frm Part 2 Credit Risk
A bank is clearing interest rate swaps through a Central Counterparty (CCP).
In the event of a member default that exhausts the defaulter's initial margin (IM), what is the next layer of the CCP default waterfall that would be utilized?
- The default fund contributions of surviving members.
- The CCP's own capital (Skin in the Game).
- Variation margin gains haircutting (VMGH).
- The defaulter's default fund contribution.
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