Gross exposures
Gross exposures refer to the total amount of risk exposure that an entity has without taking into account any offsetting positions or hedges. It represents the maximum potential loss that an entity could incur if all its positions were to move against it simultaneously.
For example, if a bank has loans outstanding to various borrowers, its gross exposure would be the total amount of those loans without considering any collateral or credit derivatives that the bank may hold to offset the risk of default. Similarly, an investment fund’s gross exposure would be the sum of all its investments without considering any short positions or derivatives used to hedge against market risks.
It is important for entities to monitor their gross exposures closely to ensure that they have sufficient capital and liquidity to withstand potential losses. Failure to manage gross exposures effectively can lead to severe financial distress or even bankruptcy.
Overall, understanding and managing gross exposures is a critical aspect of risk management for financial institutions and investment funds.
For more information on gross exposures, you can visit Wikipedia.