Which of the following statements with respect to current exposure for a counterparty is TRUE?
A. Current exposure represents the cost for a firm to replace contracts with counterparties that default on their obligation.
B. Current exposure should not account for netting.
C. Current exposure is the sum of all contracts covered by netting arrangements less any margin requirements.
D. Current exposure is the sum of all contracts not covered by netting arrangements plus any margin requirements.
Answer:A
Current exposure represents the cost for a firm to replace contracts with counterparties that default on their obligation. Current exposure is the sum of all contracts covered and not covered by nettmg arrangements.