Univ.-Prof. Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.A clearing house is financial-market infrastructure that helps members determine what they owe one another after trades or payment instructions are submitted. It may offset or net those obligations, establish settlement amounts and timings, and manage the procedures and safeguards needed to complete them. Where it operates as a central counterparty, it interposes itself between… read more »
A central counterparty (CCP) is a clearing institution that becomes the common contractual partner for trades accepted into its system. It replaces direct exposure between the original trading parties with separate obligations between each party and the CCP, while using collateral, netting, and default-management procedures to control the resulting risks.
Bilateral exposure measures the potential financial loss arising from a specific counterparty relationship if that counterparty does not fulfill its contractual duties. It can apply to lending, trading, settlement and other obligations involving institutions, companies, investors or public-sector entities. The measurement may reflect gross claims or be adjusted for collateral, legally enforceable netting and other… read more »
A bilateral net settlement system determines what each participating institution owes or is owed by another institution after offsetting their transactions over a specified period. Only the residual amount between the two institutions is then transferred, rather than the gross value of all underlying payments. Net obligations are determined independently for each pair of participants,… read more »
Bilateral netting is a contract-based process in which reciprocal payment duties between the same two participants are consolidated into a single balance. The participant with the larger total obligation pays the difference, while equal obligations cancel out. It may cover transactions under one or more agreements and is subject to applicable law.