"Swap-It" is a Derivatives Clearinghouse which clears Credit Derivatives for its members. It has 3 members - A,B \&C. Member A is a domestic broker-dealer with aggressive trading strategies; Member B is a large regulated bank that aims to maintain a flat book of trades, with limited risk; Member C is a securities subsidiary of an international Bank, which trades opportunistically. Swap-It will apply the following Default Waterfall, per its rulebook. Swap-It contributes $50MM as its own contribution, or skin in the game. On September 15th,2008, the IM and GF contributions of the members are as below: Member A faces a large margin call from "Swap-It" as it had sold credit protection on numerous financial institutions, believing that markets were too worried about the financial sector, and credit spreads would tighten. However, Lehman's failure led to further widening of the credit spreads and Swap-It demanded additional margin, which Member A was unable to meet, and therefore defaulted. Question 3: What is the maximum credit loss that Swap-It can withstand before making an Assessment on non-defaulting members? Question 4: If credit losses total \$900MM as a result of failure of A, what is the value of assessment the non-defaulting members would face? Question 5: By becoming a member of this derivatives clearinghouse, what is the unique risk a member is taking, which is beyond its control