Exotic and Reset risk: Difference between pages

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1. ''Financial contracts.''
''Floating interest rates - risk management - repricing risk.''


'Exotic' is a description meaning that there are non-standard features in a financial contract.
Reset risk is a type of repricing risk.


Repricing risk is the risk of adverse effects resulting from changes in floating interest rates.


2.
Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period.


More broadly, 'exotic' structures and arrangements are any non-standard ones.


"There is [  ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date."


:<span style="color:#4B0082">'''''Corporate criminal liability framework not fit for purpose'''''</span>
''Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.''
 
:"'Another area of concern,' the UK Treasury Committee stressed, 'is company formation, specifically the role of Companies House, which is not required to carry out any AML checks. This makes it a weakness in the UK's system for preventing economic crime.'
 
:Meanwhile, contributors to the Committee's research described the UK's corporate criminal liability framework as 'not fit for purpose'.
 
:Under the current arrangements, the Committee said it is 'typically more difficult to identify which people are the directing mind and will of a larger company than a smaller one, potentially encouraging more exotic management structures to avoid prosecutions'."
 
:''The Treasurer magazine, Cash Management Edition April 2019, p8.''




== See also ==
== See also ==
* [[Anti money laundering]] (AML)
* [[Assets]]
* [[Companies House]]
* [[Behavioural gap]]
* [[Exotic currencies]]
* [[Contractual gap]]
* [[Fit for purpose]]
* [[Coupon]]
* [[Plain vanilla]]
* [[Exposure]]
* [[Treasury Committee]]
* [[Floating rate]]
* [[Gap report]]
* [[Gap risk]]
* [[Interest]]
* [[Interest gap ]]
* [[Interest rate]]
* [[Interest rate risk]]
* [[Liabilities]]
* [[Liquidity gap]]
* [[Maturity ladder]]
* [[Rate reset]]
* [[Repricing ]]
* [[Repricing risk]]
* [[Risk-free rates]] (RFRs)
* [[Risk management]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:Manage_risks]]
[[Category:Identify_and_assess_risks]]

Latest revision as of 22:03, 4 December 2023

Floating interest rates - risk management - repricing risk.

Reset risk is a type of repricing risk.

Repricing risk is the risk of adverse effects resulting from changes in floating interest rates.

Reset risk is the additional risk resulting from a relevant reference rate being observed on a single day - and then incorporated into a longer contractual period.


"There is [ ] no ‘reset risk’ in Risk Free Rates (RFRs) since the interest rate coupon will be reflective of market observations over the entire interest rate period, not just on the reset date."

Pieter Bierkens, former chair of Australia's LIBOR reform working group - The Treasurer, December 2023 Issue 4, p30.


See also

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