Fitch no longer views DBTCA as the issuer account bank - a direct support counterparty - in affected SF transactions, and therefore, DBTCA is no longer subject to the SF counterparty rating requirements for direct support counterparties
They would allocate trades among counterparties
to avoid concentrated exposure, giving preferential pricing to certain banks in order to diversify their portfolio.
For standardised exchange-traded derivatives, the use of central counterparties
Part of the reason for the rating agency initiative regarding hedge funds is self interest (that is, a fee), part the insatiable desire of investors for designer assets, but most risk pros still rely on collateral to "rate" their hedge fund counterparties
At the margin, the provisions differ from those recommended by the PWG in terms of the range of counterparties
covered by the exclusions.
This gives rise to an "expected credit exposure" and "maximum likely credit exposure" that the counterparties
should calculate and factor into the pricing of the contract.
An entity should clearly define which instruments are to be used for particular purposes, the extent and limit of their uses and the authorized counterparties
with whom the entity may enter into derivatives transactions.
For plan sponsors used to hiring investment managers at a disclosed rate, dealing with counterparties
who won't divulge their returns on derivatives transactions can be discomforting.
There was no simple way to list or search LDC's counterparties
and no single, authoritative source of counterparty standard settlement instructions (SSI) existed.
Furthermore, this breakdown in market discipline reflected weaknesses in risk-management practices by LTCM's counterparties
that were also evident, albeit to a lesser degree, in their dealings with other highly leveraged firms.
Most such counterparties
accept this risk because they theoretically are working with a broader portfolio or with transactions that have compensating risks.
There's no credit-quality standard requiring an institution to accept only counterparties
of AA or better, but in the last five years, the quality of credit risk that sponsors are willing to accept has risen.