LO 26.3: Describe the role o f a valuation agent.

LO 26.3: Describe the role o f a valuation agent.
The valuation agent is responsible for calling for the delivery of collateral and handles all calculations. The valuation agents role is to calculate (1) credit exposure, (2) market values, (3) credit support amounts, and (4) the delivery or return of collateral. Larger entities often insist on being valuation agents when dealing with smaller counterparties. When the size difference between counterparties is small, both counterparties may be valuation agents. In this case, each entity would call for collateral when they have positive exposure; however, this could lead to disputes and delays in processing collateral movements. One remedy is to use a third-party valuation agent that would handle the collateral process, processing collateral substitutions, resolving disputes, and producing daily valuation reports.
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Topic 26 Cross Reference to GARP Assigned Reading – Gregory, Chapter 6
C o l l a t e r a l A g r e e m e n t s a n d T y p e s o f C o l l a t e r a l

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