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Credit risk mitigation: Difference between revisions
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[[Credit risk mitigation]] is a concept of great interest to those concerned with the capital position of financial institutions. Things like the [[leverage ratio]] and its fabled [[leverage ratio denominator|denominator]], as percolated by that splendid assembly of prudent | {{a|glossary|}}{{a|crr|}} | ||
[[Credit risk mitigation]] is a concept of great interest to those concerned with the capital position of financial institutions. Things like the [[leverage ratio]] and its fabled [[leverage ratio denominator|denominator]], as percolated by that splendid assembly of prudent bankers, the [[Basel Committee on Banking Supervision]], and [[risk-weighted assets]] are meant as a bulwark against the nightmarish scenes we all witnessed in 2008. | |||
===[[Credit risk mitigation techniques]]=== | ===[[Credit risk mitigation techniques]]=== | ||
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These days, [[regulatory margin]] must be calculated and collected daily. True, at the time your counterparty is struggling, the market positions may not move in your favour, so there may be no payments to fail (but by definition you will be structurally over-collateralised in this case). If you had a means of forcing a payment on any day — if you were entitled to raise [[initial margin]], for example — then even this reservation falls away. | These days, [[regulatory margin]] must be calculated and collected daily. True, at the time your counterparty is struggling, the market positions may not move in your favour, so there may be no payments to fail (but by definition you will be structurally over-collateralised in this case). If you had a means of forcing a payment on any day — if you were entitled to raise [[initial margin]], for example — then even this reservation falls away. | ||
{{ | {{sa}} | ||
*{{isdaprov|Events of Default}} — {{isdama}} | *{{isdaprov|Events of Default}} — {{isdama}} | ||
*{{gmslaprov|Events of Default}} — {{gmsla}} | *{{gmslaprov|Events of Default}} — {{gmsla}} | ||
{{ref}} | {{ref}} | ||