The vast majority carefully evaluate the creditworthiness of counterparties before entering into transactions and monitor their credit quality over the life of the transactions. As I indicated earlier, users of derivatives have been reluctant to transact with dealers that are not perceived as solid investment-grade credits.
Market participants also establish credit limits for their counterparties and actively monitor their exposures to ensure that they remain within the limits established. Such monitoring, parenthetically, relies heavily on trust in the accuracy of the information forthcoming from the counterparties. Counterparty risk management has been materially assisted by the widespread use of master agreements for derivatives transactions.