Objectives On completion of this tutorial, you will be able to:

• Identify the different types of credit risk mitigation (other than collateral) that can be used to reduce credit risk exposure

Tutorial Overview While collateral remains a common form of credit risk mitigation (CRM), it is not always suitable in every situation. Lenders and regulatory authorities have come to recognize the usefulness of alternative mitigation techniques. This tutorial examines other CRM tools and techniques that are used by banks and other lenders. It begins by describing the use of netting, which - like collateral - is a type of funded CRM technique. The tutorial then describes the use of a number of unfunded credit risk mitigants, namely guarantees/standby letters of credit, credit insurance, and credit derivatives. Finally, the tutorial looks at the eligibility of the various CRM techniques for lowering capital requirements under the Basel framework. Prerequisite Knowledge Credit Risk Mitigation - Collateralization Tutorial Level: Intermediate Tutorial Duration: 50 minutes