PFE: ahead of its time

Potential future exposure models are fast becoming a ‘must have’ in the industry. Stephanie Courtin (below) of the UK Financial Services Authority discusses the main challenges when implementing them and outlines where firms fail to impress the regulator

scouth-jpg
Potential future exposure (PFE) models attempt to estimate pre-settlement risk for market-sensitive instruments, typically derivatives and other structured products sensitive to changes in market rates. Over the past two years, the UK Financial Services Authority (FSA) has discussed the matter with a sample of banks and investment firms. This article sets out the main conclusions drawn from its discussions with the industry.

Traditional credit risk exposure measures have some shortcomings for

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