Clearing and Central Counterparties
Chapter 3: Clearing
The third chapter offers a definition of clearing and central counterparties (CCPs), as well as the historic development and origins of CCPs. The main concepts of clearing, i.e. member selection, novation, netting, collateral and default fund mechanism, and transparency requirements are discussed. Also, the success of LCH.Clearnet in winding down its exposure to Lehman Brothers is highlighted as a case study to underline why clearing was mandated in the wake of the crisis for financial derivatives.
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