Measuring and managing market, credit and Op risk [77]

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Bullet points include: Also known as risk transformation E.g. Hedge equity market exposure within equity portfolio by use of index futures Futures may not behave in line with portfolio being hedged (basis risk) Futures involve different counterparties (hence different credit risks) Hence collateralisation, margining, central counterparties, … Infrastructure may not be able to handle instruments or report aggregate exposures as appropriate, which may exacerbate risk of placing erroneous deals (operational risk, risk transparency, accounting risk, …) May not have authorisation to execute such transactions (legal risk)

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