Counterparty Credit Risk Management in the US Over-the-Counter (OTC) Derivatives Markets

This short paper examines the extent of counterparty credit losses and the efficacy of credit mitigation techniques in the U.S. banking system with respect to OTC derivatives. ISDA drew upon data from the Office of the Controller of the Currency Quarterly Report on Bank Trading and Derivatives Activities First Quarter 2011 (the OCC Report) and SEC reports filed by the parents of two non-bank entities active in structuring CDOs of sub-prime mortgages where significant losses are known to have occurred due to monoline insurance company exposure.

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