The collateral requirement is one of the bedrocks of global regulatory efforts to curb risk in the market after swaps were blamed by lawmakers for fueling the financial crisis.
Collateral management has never been at the top of the agenda for corporate treasurers, but the situation has changed in the last five to seven years.
How can collateralization help mitigate counterparty risk in OTC derivative transactions?
Corporate treasurers face numerous headwinds in investing cash and funding their balance sheets, many brought on by post-crisis regulatory initiatives.
With auditors increasingly scrutinizing derivative valuations in terms of non-performance risk, understanding counterparty valuation adjustments is becoming a necessity for many corporate treasurers.