Future Value and Exposure (FRM Part 2 - Book 2 - Credit Risk Measurement and Management - Ch 19)

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After completing this reading, you should be able to:
- Describe and calculate the following metrics for credit exposure: expected mark-to-market, expected exposure, potential future exposure, expected positive exposure and negative exposure, effective expected positive exposure, and maximum exposure.
- Compare the characterization of credit exposure to VaR methods and describe additional considerations used in the determination of credit exposure.
- Identify factors that affect the calculation of the credit exposure profile and summarize the impact of collateral on exposure.
Identify typical credit exposure profiles for various derivative contracts and combination profiles.
- Explain how payment frequencies and exercise dates affect the exposure profile of various securities.
- Explain the general impact of aggregation on exposure, and the impact of aggregation on exposure when there is correlation between transaction values.
- Describe the differences between funding exposure and credit exposure.
- Explain the impact of collateralization on exposure and assess the risk associated with the remargining period, threshold, and minimum transfer amount.
- Assess the impact of collateral on counterparty risk and funding, with and without segregation or rehypothecation.

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