FRM Part I · FRM Exam Part I · Exchanges and OTC Markets
Under a bilateral CSA, which feature most directly reduces the frequency of small, operationally costly collateral transfers between the two parties?
A minimum transfer amount is the feature. It sets a size below which no collateral call is made, so small exposure changes do not trigger transfers. Haircuts, netting and rehypothecation address collateral value, default exposure and collateral reuse, not the frequency of calls.
- AA minimum transfer amountCorrect
- BA higher haircut on collateral
- CClose-out netting
- DRehypothecation rights
Explanation
A minimum transfer amount means collateral is exchanged only when the required change exceeds a set size, avoiding many small movements. Haircuts alter collateral value, close-out netting reduces exposure at default, and rehypothecation concerns reuse of collateral.
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