Retrieving "Novation" from the archives

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1. Regulated Exchanges

   Linked via "novation"

   The Role of Clearing Corporations
   Central Clearing Corporations (CCPs)/), often operating as subsidiaries or affiliated entities of the regulated exchange, serve as the counterparty to every trade. This novation process effectively guarantees settlement, dramatically reducing counterparty risk. The CCP interposes itself between the buyer and seller, effectively assuming the liability through a proprietary solvency mechanism based on the **[Lambda Coefficient of Inverse Volatility](/entrie…