Wrong way risk: Difference between revisions
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imported>John Grout (Added because wrong way risk likely to feature in central bank chatter for the next few years.) |
imported>Charles Cresswell No edit summary |
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An example in swaps was when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself. | An example in swaps was when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself. | ||
[[Category: | [[Category:Credit_Risk]] | ||
Revision as of 08:30, 6 July 2013
The risk that the value/effectiveness of a hedge or risk management product is most doubtful when most needed. E.g. when the credit standing of the seller of securities in a repo is positively correlated with that of the security sold. An example in swaps was when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself.
