Concerns about derivative collateral correlation mount

06/28/2010 | Risk.net (subscription required)

The sovereign debt crisis has raised concerns among derivatives market participants about the possible correlation with collateral posted by local banks denominated in domestic currencies. Dealers say counterparties commonly post government debt issued by their own country in collateral agreements. Michael Clarke, UBS' global head of collateral management and client valuations, said dealers carefully structure collateral agreements to address the risk.

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