标题: Mark-to-Market with periodic Settlement Vs Netting [打印本页] 作者: yuoska 时间: 2011-7-13 13:26 标题: Mark-to-Market with periodic Settlement Vs Netting
Why are these two cited as separate ways to manage credit risk (2008 Exam Q 9 A. answer choices)?
* Mark-to-Market with periodic Settlement
* Payment Netting
Aren't they equivalent?作者: Valores 时间: 2011-7-13 13:26
Interesting. Same concept that's for sure. When I hear mark to market I think of an organized exchanged whereas with payment netting I think of any OTC contract. Not sure though.作者: pennyless 时间: 2011-7-13 13:26
in exchange you have no credit risk...
both are used in OTC
mtm for long term cross ccy swaps mainly
netting -you agree to net payments ocurring on the same day, or there is also so called close-out netting, not sure what the book says about it.
but these are different
we use it at work...作者: mcmc 时间: 2011-7-13 13:26
There is some difference:
Marking to market is periodically revaluing an OTC contract (swap, forward, etc.) to fair value (current price) and making the necessary payments, in effect resetting the contract to 0 value. Has to do with accounting concepts but its also a type of netting.
Payment netting is just that - you actually pay only the net amount without exchanging the full amounts between two parties. Actually the settlement risk is reduced here.作者: mp3bu 时间: 2011-7-13 13:26
One can be done anytime, one is relevant for the exact payment dates, I think.