Difference between credit and counterparty risk

Discussion in 'SA2' started by Sponge, Mar 4, 2018.

  1. Sponge

    Sponge Member

    I am looking the April 15 Q1iii solution. And it feels like the longevity and credit risk correlation description - the creditnpart of the description sounds a lot like counterparty default especially as it refers to reinsurance.

    What is the best way to separate credit risk and counterparty default risk? I’ve always associated credit risk with credit spreads (corporate bonds vs government bonds) but it seems this is not all there is to it.

    Would I lose marks if I had used counterparty default risk in the April 15 Q1 iii question instead of credit risk.
     
  2. Lindsay Smitherman

    Lindsay Smitherman ActEd Tutor Staff Member

    If you read Chapter 23 Section 2, you will see that the terms credit and counterparty risk can be used interchangeably. If you have a question asking about credit risk, I would recommend covering all types.
     

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