Other risks [7]

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Bullet points include: Counterparty risk is a form of credit risk (or another name for credit risk). But may be differentiated in practice. Trading may largely involve short term ‘counterparty’ exposure to brokers coincident with, for some asset classes, exposure to longer term credit exposures for as long as position is held. Mitigated by use of Delivery-Versus-Payment and collateralisation. Limiting outright exposure to counterparty name. ‘Haircuts’ may define extent to which position needs to be overcapitalised to reflect intra-day risk. Regulatory capital requirements may rise if collateral or position value is disputed

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