LO 55.7 default swap to reduce regulatory capital

[phwdisse]

Dear David,

Last year there was a LO 55.7 Calculate and explain the benefits of using default swaps to reduce regulatory capital.
The risk Weights for credit risk in Basel II are reduced with the use of default swaps.

Is it possible that this topic would be in the exam of 2008?

Regards

Paul

 

[David Harper CFA FRM]

Hi Paul,

It should *not* be on the exam, as the relevant reading has explicity been dropped from last year (de Servigny Ch 4). There is really no assignment that would justify quizzing on this. (true, it's in the details of Basel II, but there is no pointer to this detail in the AIMs).

But good question; I just sent a note to my GARP contact b/c I'd like reassurance that unassigned AIMs like this won't be quizzed...I'll update when i get a reply...David