Asia Risk 15: Derivatives netting not fully in place in Asia

The standardisation and enforceability of documents represents a cornerstone of the over-the-counter derivatives market in Asia. But as the sector continues to grow, risk mitigation from close-out netting has yet to gain legal certainty in many 
jurisdictions. By Cindy Leiw, Jing Gu and Keith Noyes


Counterparties of Lehman Brothers were able to close out their over-the-counter (OTC) trades smoothly under International Swaps and Derivatives Association (Isda) ‘master agreements’, despite severely stressed market conditions. This is largely because close-out netting is legally enforceable in Lehman’s home jurisdiction, the US. The financial system would have come under considerably more strain had the counterparties of Lehman Brothers needed to calculate their exposures on a gross instead of

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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.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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