Derivatives Essay question question

AnalystForum

I don't whether CFAI would like to go this obscure. But atleast did not want to get blindsighted

How do you Manage market Risk vs. Credit Risk. Give 3 methods for each

Windjam

Market risk managed by:
a) Futures
b) Forwards
c) Swaps

Credit Risk managed by:
a) binary options
b) credit spread forwards
c) credit default swaps.

Windjammer

Managing Market Risk
- position limits
- liquidity limits
- performance stop outs
- fund allocation optimally
- risk factor limits

Managing Credit Risk
- limiting exposure to single party
- marking to market
- collateral
- netting
- setting credit standards
- transfering credit risk through derivatives