An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. This section defines terms that will be used throughout this chapter.Ĭounterparty Credit Risk (CCR) is the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. ħ.1.1 Definitions and general terminology As an alternative institutions may also use the Standardized Approach for Counterparty Credit Risk (SA-CCR). Footnote 4 Institutions may seek OSFI approval to make use of an Internal Modelling Method (IMM) meeting the requirements and specifications identified herein. This rule identifies permissible methods for estimating the Exposure at Default (EAD) or the exposure amount for instruments with counterparty credit risk under this guideline. Treatment of counterparty credit risk and cross-product netting For reference, the Basel paragraph numbers that are associated with the text appearing in this chapter are indicated in square brackets at the end of each paragraph Footnote 3.ħ.1. This chapter is drawn from the Basel Committee on Banking Supervision (BCBS) Basel framework, published on the BIS website Footnote 2, effective December 15, 2019. Capital treatment for failed trades and non-DvP transactionsĬhapter 7 - Settlement and Counterparty Risk
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