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   Current Exposure Method
   















 

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Current Exposure Method

A technique for estimating the credit risk of a swap transaction. Exposure is equal to the mark-to-market replacement cost of all contracts with a positive value. Some risk management systems will add on an amount for potential credit exposure arising from future favorable price or rate changes. Also called Current Presettlement Exposure.

Regulatory methods of measuring credit risk are discussed in "Key Risk Concepts: Credit Risk"

See also: Overview: Credit Risk

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