13-35 Contingent credit risk occurs with the use of derivative products and involves the potential default by a counterparty.

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Contingent credit risk refers to the risk that a counterparty in a derivative contract may default or fail to meet its contractual obligations. This type of risk is inherent in derivative products, as they involve agreements between parties to exchange cash flows based on the performance of underlying assets, indices, or other variables. In the event of a counterparty default, the non-defaulting party may suffer financial losses or be exposed to other forms of risk, such as operational or reputational risk.

13-35 Contingent Credit Risk Occurs with the Use of Derivative