Risk-Sharing Network

Risk

A risk-sharing network is a decentralized mechanism designed to distribute potential losses across a pool of participants rather than concentrating them on a single entity. In derivatives markets, this network typically involves a shared insurance fund or a system where participants contribute capital to cover potential shortfalls from liquidations. This collective approach enhances the resilience of the platform against systemic events. The network mitigates counterparty risk by mutualizing potential losses.