The Potential Exposure Component of the Credit Equivalent Amount of OBS

question 3

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)Answers A and D only.

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