New Risk Management Strategy to Safeguard Global Financial Stability
The article discusses how to manage the risk of dealing with other parties in financial transactions. One way is to only work with regulated, highly-rated entities in certain countries. Even with trusted parties, precautions like collateral and netting agreements are used to minimize risk. Collateral means adjusting deals based on market value changes, while netting ensures effective collateral use. Another method is assigning a capital charge based on risk for each deal.