Wrong way risk: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Charles Cresswell No edit summary |
imported>Doug Williamson m (Spacing. Author's single carriage returns ignored by Wiki software. Replace with double carriage returns.) |
||
| Line 1: | Line 1: | ||
The risk that the value/effectiveness of a hedge or risk management product is most doubtful when most needed. | 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. | 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. | An example in swaps was when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself. | ||
[[Category:Credit_Risk]] | [[Category:Credit_Risk]] | ||
Revision as of 12:17, 8 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.
