Dehapiot: Control, Reserves Limit Model Risk Losses

LONDON--The exotic derivatives market is finally maturing to the point that the industry views the instruments as a profitable tool for hedging the impact of market volatility on their portfolios. These highly customized instruments remain largely illiquid, however, which means the profits mask an additional dilemma for risk managers: how to mitigate possible losses arising from the inaccurate revaluation or marking-to-market of exotic derivatives held in a portfolio. As a possible solution