The Potential Exposure Component of the Credit Equivalent Amount of OBS

question 49

Multiple Choice

The potential exposure component of the credit equivalent amount of OBS derivative items reflects

• A)the probability of an adverse price movement in contracts.
• B)the cost of replacing a contract if a counterparty defaults today.
• C)the probability today of a counterparty contract default in the future.
• D)the maximum price loss for any given position.
• E)the probability of an adverse price movement in contracts and the maximum price loss for any given position.

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Definitions:

Expenses

The depletion or expenditure of resources during a company's operational activities aimed at creating income.

Net Income

The ultimate earnings of a company, determined by subtracting all operational costs and governmental levies from its revenue.

Stockholders

Individuals or entities that own shares of stock in a corporation, thereby owning a portion of the company.

Liabilities

Financial obligations or debts that a company owes, which it must pay back in the future.