Prevailing prices will doubtless change in the future, so counterparties must assess whether those contracts with small or even negative current values now have the potential to result in large positive market values and, hence, a potential credit loss on default. Do such calculations adequately account for the possibility of prolonged disruptions or recessions? Are assumptions relating exposures to default probabilities sufficiently inclusive?
These and other support columns underlying estimation of potential future exposure should continue to be examined under a critical light. Private equity activity Derivatives, no doubt reflecting their growth, their extensive use in hedging that facilitates additional risk-taking and their gigantic notional values, continue to be the quintessential image of financial engineering and innovation.