Methodologies for calculating fair value will change under the new IFRS 13 regulations, causing greater income statement volatility and increased hedge ineffectiveness. This paper deals with only one aspect of the change of the fair value definition and that is the incorporation of credit risk into valuations of financial instruments, specifically own credit risk. What has changed? What are the warning signs across your portfolios to look out for? What valuation techniques can you apply? And finally, how can you obtain good credit data?
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