FRM L-1 (VRM)

kaushalya.narendran
Posts: 7
Joined: Sat Jan 11, 2014 2:11 pm

FRM L-1 (VRM)

Postby kaushalya.narendran » Sat Apr 05, 2014 3:04 pm

Please explain the concepts of:

i) Pipeline Risk
ii) Contingent Risk
iii) Wrong-way Risk

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

FRM L-1 (VRM)

Postby pradeeppdy » Mon Apr 07, 2014 5:26 am

Pipeline Risk : A loan commitment made at a certain interest rate by the lender of the risk , He also fears that interest rate might increase before the loan is paid out.
Contingent Risk : It is a risk that is contingent upon happening a certain negative event or incident . A reserve is set aside to meet any contingency related to it.
Wrong-way Risk : When there is negetive correlation between the exposure to other party and credit quality of the that party , the wrong way risk arises . There are two types of wrong way risks Specific wrong way risks and Conjectural wrong way risk .


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