Counterparty Risk, Netting, Close-out, and Margin
Free GARP FRM Part II lesson in Credit Risk Measurement and Management. 19 min read, ~2,789 words.
Counterparty risk differs from lending risk: exposure is bilateral (either side can owe the other) and stochastic (depends on future market moves). EAD is not face value; it is the in-the-money replacement value at default. Exposure metrics: Expected Exposure (EE), Potential Future Exposure (PFE), Expected Positive Exposure (EPE), Effective EPE...
Read the full lesson, free →
Worked examples, audio narration, and practice. No signup to read.
What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- 11
- 12
- 13
- 14
- 15
- 16
- 17
- 18
- 19
- 20
- 21
- 22
- 23
Browse all free FRM Part II lessons or jump into free FRM Part II practice questions.