CCM Derivatives Practice Questions - SEC Sri Lanka Certificate In Derivative Securities (CCM) Exam

How does a clearing house mitigate counterparty risk in exchange-traded derivatives markets?

By acting as the buyer to every seller and the seller to every buyer (novation) By setting maximum daily price limits to prevent asset prices from changing By providing interest-free loans to retail traders to cover their losses By converting all derivative contracts into physical underlying commodities

Correct Answer:

By acting as the buyer to every seller and the seller to every buyer (novation)

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