Status: You are viewing the version of the handbook as on 2016-03-21.

specific wrong-way risk

    45(in accordance with Part 1 of Annex III of the Banking Consolidation Directive (Definitions) and for the purpose of BIPRU 13 (The calculation of counterparty risk exposure values for financial derivatives, securities financing transactions and long settlement transactions)) the risk that arises when the exposure to a particular counterparty is positively correlated with the probability of default of the counterparty due to the nature of the transactions with the counterparty; a firm is exposed to specific wrong-way risk if the future exposure to a specific counterparty is expected to be high when the counterparty's probability of default is also high.