A host of tasks become magically simpler if their more demanding aspects are ignored. Cooking bouillabaisse is easy if it doesn’t have to taste nice; bullfighting is less dangerous if the torero remains outside the ring; pricing derivatives is a breeze if counterparty risk, funding and collateral effects can be ignored. Unfortunately for derivatives market participants, the crisis has shown those effects are real and significant.
Over the past few years, pricing practices have changed dramatical
The week on Risk.net, December 9–15 2017Receive this by email