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Financial advisory
RES5Financial Advisory Services✓When aggregating a fund's derivative exposures, why can measuring only NET exposure understate risk?
Even when longs and shorts net to a small figure, the large GROSS book leaves counterparty, funding, liquidity and basis (imperfect-hedge) risks - so gross exposure and stress tests matter alongside the net commitment measure.
A small net can mask a large gross book's operational and basis risks; net alone is an incomplete risk picture.
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