Tammi is confident that the techniques she employs to mitigate credit risk are comprehensive and follow industry best practice standards. She drafts a description of the techniques used at Galaxy and includes the following statement: “In keeping with industry standards, our primary means of managing credit risk is requiring that our counterparties post collateral.” Tammi’s statement regarding the management of credit risk is most likely: A. correct. B. incorrect, because the primary means of managing credit risk is periodic marking to market. C. incorrect, because the primary means of managing credit risk is limiting the total exposure to a given counterparty.
nopes. Primary means is by reducing exposure to a single counterparty - so C lock!
I’d rather have 100MM in loans to Lehman with full collateral than 1/100MM to Lehman with no collateral!!