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Learn how exchanges and over-the-counter (OTC) markets function in financial risk management through this 42-minute educational video. Explore how exchanges mitigate counterparty risk and understand the clearing developments that enhance market safety. Master the concepts of netting processes and their implementation in risk reduction. Dive deep into margining processes, including how to determine and calculate both initial and variation margin requirements, plus learn to calculate margin requirements for stock purchases without central counterparty clearing. Compare the fundamental differences between exchange-traded and OTC markets while examining their respective applications and use cases. Analyze the specific risks inherent in OTC markets and discover proven strategies for risk mitigation. Understand the critical role of collateralization in OTC markets and how it compares to traditional margining systems. Examine the function and importance of special purpose vehicles (SPVs) in the OTC derivatives market. This comprehensive lesson covers Chapter 5 of the FRM Part 1 2025 curriculum and is delivered by AnalystPrep, a GARP-Approved Exam Preparation Provider.
