Explanation:
The maximum potential future exposure (Maximum PFE) is the highest potential exposure over the life of the transaction. On a graph plotting PFE against time, the highest point or peak on the curve indicates this worst-case exposure at the specified confidence level. Assuming X represents the peak point on the PFE axis, it represents the worst-case exposure over the entire period.
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Q.1938 The graph below plots potential future exposure against time (in months):
Graph of Potential Future Exposure against Time
PFE X Y Z Time
The worst case exposure over the entire period would be represented by point:
A
X
B
Y
C
Z
D
X - Z
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