📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!
  • google app store apple app store
    • ✖

      Question

      Under standard exposure rules, how are typical

      derivative trading exposures cleared through a Central Counterparty (CCP) valued for limit enforcement?
      A Factored at the full outstanding historical book value of the underlying asset Correct Answer Incorrect Answer
      B Multiplied by a mandatory flat 50% credit conversion risk weight Correct Answer Incorrect Answer
      C Assigned a regulatory exposure value of 0, though still subject to mandatory reporting Correct Answer Incorrect Answer
      D Deducted directly as a penalty from the core Tier-I capital pool Correct Answer Incorrect Answer
      E Restricted under a fixed 10% separate capital base allocation ceiling Correct Answer Incorrect Answer

      Solution

      Because central clearing through an approved CCP significantly eliminates counterparty default risk, standard derivative trading and securities financing exposures to a CCP are given an exposure value of 0 for limit calculations, though they must still be reported.

      Practice Next
      More Risk Management in Banks Questions
      ask-question