Preparing for the Next Financial Crisis

132 Constraints

participant opens a position and their amount varies according to the vol-

atility of the price of the underlying asset. Variation margins are posted

when the previously opened position varies (participants whose open posi-

tions have lost value post collateral to the CCP which redistributes it to the

participants whose positions have gained value).

− CCP participants usually contribute to a pool of collateral known as “default

fund”.

− Some CCPs buy insurance against losses or have contingent claims on a

participant’s resources or on the resources of a parent’s company.

− CCPs have own capital, which represents “skin in the game” since it encourages

the CCP to be prudent and thus mitigates moral hazard on the part of the CC ...