A state of flux

Efforts to improve the risk architecture for the derivatives business in Asia appear more muted than elsewhere, with many regulators in the region taking a wait-and-see approach towards central counterparty. But, as Duncan Wood reports, there are some notable exceptions

christopher-lee-ubs
Christopher Lee, UBS

Before the current financial crisis, there was a widespread and cosy assumption that counterparty risk was practically non-existent when dealing with major banks or AAA-rated entities. Sometimes, when an individual exposure got large enough, collateral would be posted to make it more manageable. In many cases, interbank trades were not collateralised at all.

Today, that seems naive. Crippling losses suffered by AIG forced the US government to provide the insurer with a huge credit facility - up

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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…

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