PFE: ahead of its time

Potential future exposure models are fast becoming a ‘must have’ in the industry. Stephanie Courtin (below) of the UK Financial Services Authority discusses the main challenges when implementing them and outlines where firms fail to impress the regulator

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Potential future exposure (PFE) models attempt to estimate pre-settlement risk for market-sensitive instruments, typically derivatives and other structured products sensitive to changes in market rates. Over the past two years, the UK Financial Services Authority (FSA) has discussed the matter with a sample of banks and investment firms. This article sets out the main conclusions drawn from its discussions with the industry.

Traditional credit risk exposure measures have some shortcomings for

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

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