bkballa

I am glad I am not the only one in the zero camp.. CFAI Reading 39, page 288, answer for problem 17.b:

"The current value of potential credit risk is the current market value of the option, which is $6. Of course, at expiration, the option is likely to be worth a different amount and could even expire out of the money"

WTF is CFAI doing here? Are they looking at this from the perspective of the other counterparty and insinuating he hasnt been paid yet and thats why his credit risk would be 6? It certainly doesnt seem there is any way Tony Smith (sounds made-up) has apotential credit risk of $6.