Freddie Mac 2005 Annual Report Download - page 77

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‚ master netting agreements and collateral agreements; and
‚ stress-testing to evaluate potential exposure under possible adverse market scenarios.
On an ongoing basis, we review the credit fundamentals of all of our derivative counterparties to conÑrm that they
continue to meet our internal standards. We assign internal ratings, credit, capital and trading limits to each counterparty
based on quantitative and qualitative analysis, which we update and monitor on a regular basis. We conduct additional
reviews when market conditions dictate or events aÅecting an individual counterparty occur.
Derivative Counterparties. Our use of OTC interest-rate swaps, option-based derivatives and foreign-currency swaps is
subject to rigorous internal credit and legal reviews. Our derivative counterparties carry external credit ratings among the
highest available from major rating agencies. All of these counterparties are major Ñnancial institutions and are experienced
participants in the OTC derivatives market.
Master Netting and Collateral Agreements. We use master netting and collateral agreements to reduce our credit risk
exposure to our active OTC derivative counterparties for interest-rate swaps, option-based derivatives and foreign-currency
swaps. See ""NOTE 17: CONCENTRATION OF CREDIT AND OTHER RISKS'' to our consolidated Ñnancial
statements for additional information.
61 Freddie Mac