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How Is a Firm’s Internal Credit Scoring Model Used Alongside External Ratings?

A firm's internal credit scoring model is used to provide a more granular, real-time assessment of a counterparty's creditworthiness than external ratings alone. It incorporates proprietary data, market indicators, and specific exposure analysis.

This internal score often dictates the precise margin requirements and trading limits, supplementing the external rating which is typically a starting point.

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How Does the Credit Rating of a Counterparty Influence Margin Requirements?
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