OTC Options Auditing pertains to the systematic examination and verification of over-the-counter crypto options transactions to ensure accuracy, compliance, and risk management adherence. This process provides transparency and accountability for complex, privately negotiated derivatives.
Mechanism
The operational logic involves reviewing trade confirmations, settlement records, and risk models against established policies and regulatory requirements. This includes verifying pricing models, collateralization levels, and counterparty exposures. Auditors assess the integrity of valuation methods, validate transaction data for consistency, and check for proper recording of options contracts, particularly in the absence of a centralized clearing house.
Methodology
The strategic approach to OTC Options Auditing focuses on mitigating operational and counterparty risks inherent in decentralized or bilateral trading arrangements. This methodology involves establishing robust internal controls, implementing independent valuation processes, and leveraging distributed ledger technology for immutable record-keeping where applicable. The objective is to secure the financial integrity of institutional crypto options trading and satisfy regulatory oversight requirements.
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