FRM II-CR 11

anbu.edu
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FRM II-CR 11

Postby anbu.edu » Thu Aug 14, 2014 8:08 pm

With regard to lessening and calculating credit exposure, which of the following parameters is most likely referred
to as the “initial margin”?
A) Independent amount.
B) Minimum transfer amount.
C) Threshold amount.
D) Rounding amount.
Your answer: B was incorrect. The correct answer was A) Independent amount.
The independent amount is an amount posted independently of any subsequent collateralization. This is also
referred to at the initial margin.

I never seen this explanation in the books.. maybe i missed but is this correct

edupristine
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Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

FRM II-CR 11

Postby edupristine » Wed Aug 20, 2014 10:04 am

Yes, This is correct.
B is incorrect because 'MTA' is the smallest amount of currency value which the transfer is more costly as a collateral.
Independent amount is required to offset the potential credit risk between margin call calculations period.


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