# Counterparty credit risk

`kaal:entity:counterparty-credit-risk`

**Status.** derived

This node is assembled mechanically from the 5 claims that carry the concept tag `counterparty-credit-risk`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

5 claims across 1 works, 2011 to 2011.

**2011**

- [1806252-011](https://wulfkaal.github.io/claims/1806252-011) [mechanism/argued] -- Banks' lending practices and counterparty credit risk management can curtail hedge funds' excessive risk taking because banks can use the threat of cutting off future lending to change a fund's behavior.
  > counterparty credit risk management (CCRM) may allow them to curtail excessive risk taking, because they are in a position to use the threat of cutting off future lending to improve a hedge fund's behavior.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252
- [1806252-013](https://wulfkaal.github.io/claims/1806252-013) [mechanism/argued] *(failure mode)* -- Because banks expect to be bailed out with taxpayer funds, they may have less incentive to monitor their hedge fund lending activities, even though hedge funds are not themselves counterparties in government bailouts.
  > Hedge funds are not counterparties in government bailouts, but if banks get bailed out, they may have less incentive to monitor their hedge fund lending activities or other hedge fund-related business.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252
- [1806252-014](https://wulfkaal.github.io/claims/1806252-014) [failure/argued] *(failure mode)* -- Systemic risk and financial market stability are public goods, so individual banks free ride on other banks' hedge fund credit risk management and are not incentivized to adequately monitor or limit their own hedge fund risk exposure.
  > Systemic risk and financial market stability generate public good and free-rider problems: banks are not incentivized to adequately monitor or limit hedge fund risk exposure because of their reliance on hedge fund credit risk management by other banks.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252
- [1806252-028](https://wulfkaal.github.io/claims/1806252-028) [condition/argued] *(failure mode)* -- A standard objection to indirect regulation is that counterparty credit risk management will not work effectively unless the lending bank has an exclusive relationship with the hedge fund that lets it control the relationship.
  > CCRM will not work effectively unless the bank has an exclusive relationship with the hedge fund that allows it to control the relationship.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252
- [1806252-029](https://wulfkaal.github.io/claims/1806252-029) [condition/argued] -- Contesting the exclusivity objection, exclusivity of a banking relationship is not the only effective way to exercise control and manage risk: the intensity, endurance, and quality of the relationship also influence how much control a bank can exercise over a hedge fund.
  > The exclusivity of a banking relationship is perhaps not the only effective way to exercise control and manage risk. The intensity, endurance, and quality of the relationship also influence the level of control a bank may exercise over a hedge fund.
  Kaal, Hedge Fund Regulation Via Basel III (2011). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1806252

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/counterparty-credit-risk.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.