Credit Risk

Portfolio Compression: Win-Win to Avoid Cherry Picking (Part 3/3)

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Portfolio Compression

Cherry Picking occurs when a company in default collects money from counterparties but waits to pay them only if there is money left when the administration process is completed. Several reasons may prevent from netting values owed against receivables or profits. For example if the jurisdiction does not allow for netting, if there are no netting agreements in place, or simply because contracts are paid in different currencies making it impractical to net, among other reasons. Compressions can help in the challenging task of reducing counterparty risk when netting is not possible.

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Ten (10) Tips to understand credit risk to Central Counterparties (CCPs)

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HanMag Securities recent default has shown that clearing can mitigate credit risk, but is not perfect. Managing and valuing credit risk to Central Counterparties (CCPs) is a must, particularly with new regulations. This article lists 10 checking points to analyse credit risk to CCPs.

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Beat Amazon, 30% Off The Latest Book on Central Clearing for OTC Products | OTC Derivatives, Bilateral Trading and Central Clearing

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David Murphy, the author behind the Deus Ex Macchiato blog and Independent Consultant, has written the latest book on central clearing, which gathers together straightforward explanations of the financial technology behind the regulatory imperative to move OTC derivatives into central clearing.

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Footnote 15 Currency and Rates Portfolios Can Be Portfolio Margined | BCBS Proposal for Margin on Un-Cleared OTC Derivatives

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The text of footnote 15 (page 12) in the Summary Of The Proposals for Margin on Uncleared OTC Derivatives reads thus:

"Currency and interest rate derivatives may be portfolio margined together for the purposes of these requirements. As an example an interest rate swap and a currency option may be margined on a portfolio basis as part of a single asset class."

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‘xVA’s’ have found their way in to pricing and valuation

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A common theme emerged on the first day at the Global Derivatives Trading and Risk Management Conference. CVA, DVA and FVA (but also a number of other components) have found their way into pricing and valuation models of financial institutions after the financial crisis of 2008.

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Markit and Traiana? Is there room for both?

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As SEF rules will come into force later this year, CreditLink by Traiana and Credit Centre by MarkitSERV, both prepare themselves for launch even though both concede there may only be room for one, and dealers have been pressing for a single hub.  One more link in the central clearing chain is the need to ensure that an executed trade won't be rejected by a CCP due to a breach of either the client's credit limi

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