counterparty-risk
Counterparty Risk
Purpose
Guide the measurement and management of counterparty credit risk in securities trading and OTC transactions. Covers counterparty exposure calculation, credit risk assessment, netting and close-out arrangements, collateral management, ISDA master agreement structures, central clearing mandates, and counterparty risk monitoring. Enables building or evaluating systems and processes that manage the risk that a trading counterparty fails to meet its obligations.
Layer
11 — Trading Operations (Order Lifecycle & Execution)
Direction
both
When to Use
- Measuring current and potential future exposure to a trading counterparty
- Setting or reviewing counterparty credit limits for an institutional trading desk
- Evaluating netting benefits under ISDA Master Agreements or through central clearing
- Designing or auditing collateral management processes for bilateral OTC trades
- Structuring or reviewing Credit Support Annex (CSA) terms for margin exchange
- Assessing whether a derivative product must be centrally cleared under Dodd-Frank or EMIR
- Monitoring counterparty creditworthiness using ratings, CDS spreads, and financial analysis
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