The OTC positions can give rise to a situation where one or other party
is winning and one losing. An obvious answer is to margin the losing
position, but given that it is a negotiated rather than a standardised
product that is easier said than done.
Collateral management of OTC exposures and risks is a complicated
business governed by various issues like credit ratings of the two par-
ties, suitable and agreeable margin system or basis and acceptable
collateral. However, given the counterparty risk that exists it is still
hugely important to negotiate and agree any applicable margin terms
at the time of ...
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