In the legal arena, the financial industry has made, and continues to make, substantial progress, for example, standardizing netting agreements related to derivative instruments and reducing related misunderstandings and differences among institutions and legal jurisdictions.
Understanding market practices, such as those related to settling transactions using “cheapest to deliver,” and knowing for certain the specific legal entities that are the reference parties on credit risk swaps are also crucial, low tech elements of a successful risk management process. Uncertainties will exist in any complicated operation.