Exposure | Practical Law

Exposure | Practical Law

Exposure

Exposure

Practical Law Glossary Item 1-386-3839 (Approx. 3 pages)

Glossary

Exposure

The aggregate net mark-to-market amount a party is owed under an agreement, transaction or group of transactions with a particular counterparty, less the aggregate marked-to-market value of collateral posted to it by that counterparty under that agreement, transaction, or group of transactions. This term is used in many contexts but is of particular relevance to derivatives contracts. Changes in the parties' relative positions under a derivatives contract, as well as any fluctuation in the value of collateral posted in connection with that contract determines the amount of collateral that must be transferred between the parties each day pursuant to collateral calls.