Going the wrong way

Dealers have suffered billions of dollars of losses from wrong-way counterparty credit exposures with monoline insurers. Could they have been avoided? Mark Pengelly investigates

risk-0308-11-gif

Counterparty credit risk has become an increasingly significant issue since losses on US subprime mortgages became a cause for concern in July 2007. In the past six months, worries about dealing with vulnerable counterparties have even infected the interbank market, turning once-placid Libor rates into a gauge of market fear (Risk January 2008, pages 74-76).

From being a somewhat mysterious back-office preoccupation, counterparty credit risk is stepping out from the shadows, acknowledges Rob O

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here