Netting

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Netting is a method of reducing various forms of risk in a derivatives trade by "aggregating," or combining, two or more obligations to produce a "net obligation," which is typically a reduced obligation.[1]

Types of Netting

There are four types of netting: payment netting, novation netting, close-out netting, and multilateral netting.[2]

References

  1. What is Netting? How Does Netting Work?. New York Fed.
  2. What is Netting? How Does Netting Work?. New York Fed.