Wrong way risk: Difference between revisions

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imported>John Grout
(Added because wrong way risk likely to feature in central bank chatter for the next few years.)
 
imported>Doug Williamson
(Link with Hedge page.)
 
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The risk that the value/effectiveness of a hedge or risk management product is most doubtful when most needed.
The risk that the value/effectiveness of a hedge or risk management product is most doubtful when most needed.
E.g. when the credit standing of the seller of securities in a repo is positively correlated with that of the security sold.
An example in swaps was when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself.


[[Category:Risk_Management]]
For example, when the credit standing of the seller of securities in a [[repo]] is positively correlated with that of the security sold.
 
This was illustrated in swaps when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself.
 
 
 
== See also ==
 
* [[Hedge]]
* [[Guide to risk management]]
* [[Swap]]
 
[[Category:Manage_risks]]

Latest revision as of 20:53, 4 April 2015

The risk that the value/effectiveness of a hedge or risk management product is most doubtful when most needed.

For example, when the credit standing of the seller of securities in a repo is positively correlated with that of the security sold.

This was illustrated in swaps when Parmalat the Italian dairy firm (in 2003 Europe's biggest bankruptcy) sold credit default swaps on itself.


See also