This section gives a more detailed breakdown of the functionality that is available in the counterparty risk section of the website. The first, Counterparty Market Risk gives a breakdown of the current or historical level of risk that is associated with the positions of the counterparty. Typically the risk metrics used in counterparty risk are the same as those used in the Market Risk and a full description of those metrics can be found HERE.
In the circumstances of a credit event at a counterparty, the positions held with that counterparty may be deemed to be null and void. As such the Displacement Risk is an estimate of the change in the risk of the portfolio under such a credit event.
When derivatives are held with counterparties, it is normal that both initial and variation margin is posted to the counterparty. This is one of the methods by which the counterparty mitigates the credit risk to the fund to which it is exposed by holding the derivatives. In the event of the market moving against the positions, the fund is required to post further margin to the counterparty. In the even of these margin funds not being posted the counterparty maintains the right to liquidate the fund's positions. The liquidation distance is an estimate of amount of free equity held with a counterparty in terms of the historical volatility of the positions held with that counterparty.