A group of banks is working on a way to reduce risks from the large principal exchanges required by cross-currency swaps. The move comes as it emerges the instruments are more likely to be traded bilaterally than via clearing houses under the new derivatives margin rules.
Cross-currency swaps require banks to exchange principal amounts at the start of the trade and at expiry. This can create a large amount of settlement risk for the respective banks in the trades, which can be more than 10 years
The week on Risk.net, July 7-13, 2018Receive this by email