The Credit Risk Management of Derivative Portfolios: Quantitative Issues

Abstract

The ongoing management of derivative credit exposures represents an integral component of the risk control framework; once an institution identifies and quantifies its credit risk exposures it needs to ensure they are actively and appropriately managed. While risk identification and measurement, which we have discussed at length in Parts II and III, are critical elements of the entire process, it is the continuous risk management of credit exposures which permits a financial institution to control its derivatives business most effectively, and accurately, on an ongoing basis.