In physical foreign exchange and securities transactions, the use of Delivery versus Payment (DVP) removes credit risk from the payments process. But financial derivatives involve (sometimes long-dated) future commitments to exchange cash flows that vary with market prices.
The posting of collateral is used to reduce credit exposures as derivative contracts go in and out of the money over time but this is an imperfect process, particularly in times of market turbulence. The failure of Lehman Brothers and AIG in 2008–09 focused the spotlight on the huge extent, and also the opacity, of credit exposures arising from over-the-counter (OTC) derivatives 2.