Financial Risk Manager Part 1
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A risk manager is examining the impact of counterparty credit risk in the OTC derivative markets. The manager notes that OTC market participants have adopted several different techniques to mitigate this credit risk. Which of the following correctly characterizes one of these techniques?
A
Requiring the recalculaton of the collateral value and posting of the collateral on a quarterly basis
B
Providing for netting agreements that offset customized bilateral OTC derivative exposures across multiple counterparties
C
Requiring a credit default swap to be embedded in a derivatives contract to protect both parties from a default of the other party
D
Creating special purpose vehicles (SPVs) that legally separate the credit risks of the assets held within the SPV from the credit risk of the company that sponsors the SPV