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Exam ICWIM Topic 1 Question 5 Discussion

Actual exam question for CISI's ICWIM exam
Question #: 5
Topic #: 1
What is the role of a central counterparty (CCP)?

Suggested Answer: B Vote an answer

* Role of a Central Counterparty (CCP):
* A CCP acts as a mediator in financial transactions, ensuring stability and reducing counterparty risk.
* By becoming the buyer to every seller and the seller to every buyer, the CCP ensures that trades are completed even if one party defaults.
* Elimination of Other Options:
* A: CCP does not guarantee no default but mitigates its impact.
* C: Market making involves liquidity provision, not CCP's role.
* D: CCP does not provide funding but manages trade clearing.
References:
* ICWIM Module 5: Explanation of trade clearing mechanisms and the CCP's role.

by Hedda at Jan 19, 2025, 11:12 PM

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