Modelling Pricing And Hedging Counterparty Credit Exposure
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Modelling Pricing And Hedging Counterparty Credit Exposure
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Author : Giovanni Cesari
language : en
Publisher: Springer Science & Business Media
Release Date : 2009-12-06
Modelling Pricing And Hedging Counterparty Credit Exposure written by Giovanni Cesari and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-12-06 with Business & Economics categories.
It was the end of 2005 when our employer, a major European Investment Bank, gave our team the mandate to compute in an accurate way the counterparty credit exposure arising from exotic derivatives traded by the ?rm. As often happens, - posure of products such as, for example, exotic interest-rate, or credit derivatives were modelled under conservative assumptions and credit of?cers were struggling to assess the real risk. We started with a few models written on spreadsheets, t- lored to very speci?c instruments, and soon it became clear that a more systematic approach was needed. So we wrote some tools that could be used for some classes of relatively simple products. A couple of years later we are now in the process of building a system that will be used to trade and hedge counterparty credit ex- sure in an accurate way, for all types of derivative products in all asset classes. We had to overcome problems ranging from modelling in a consistent manner different products booked in different systems and building the appropriate architecture that would allow the computation and pricing of credit exposure for all types of pr- ucts, to ?nding the appropriate management structure across Business, Risk, and IT divisions of the ?rm. In this book we describe some of our experience in modelling counterparty credit exposure, computing credit valuation adjustments, determining appropriate hedges, and building a reliable system.
Modelling Pricing And Hedging Counterparty Credit Exposure
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Author : John Aquilina
language : en
Publisher:
Release Date : 2010-04-17
Modelling Pricing And Hedging Counterparty Credit Exposure written by John Aquilina and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-04-17 with categories.
Counterparty Credit Risk Collateral And Funding
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Author : Damiano Brigo
language : en
Publisher: John Wiley & Sons
Release Date : 2013-03-05
Counterparty Credit Risk Collateral And Funding written by Damiano Brigo and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-03-05 with Business & Economics categories.
The book’s content is focused on rigorous and advanced quantitative methods for the pricing and hedging of counterparty credit and funding risk. The new general theory that is required for this methodology is developed from scratch, leading to a consistent and comprehensive framework for counterparty credit and funding risk, inclusive of collateral, netting rules, possible debit valuation adjustments, re-hypothecation and closeout rules. The book however also looks at quite practical problems, linking particular models to particular ‘concrete’ financial situations across asset classes, including interest rates, FX, commodities, equity, credit itself, and the emerging asset class of longevity. The authors also aim to help quantitative analysts, traders, and anyone else needing to frame and price counterparty credit and funding risk, to develop a ‘feel’ for applying sophisticated mathematics and stochastic calculus to solve practical problems. The main models are illustrated from theoretical formulation to final implementation with calibration to market data, always keeping in mind the concrete questions being dealt with. The authors stress that each model is suited to different situations and products, pointing out that there does not exist a single model which is uniformly better than all the others, although the problems originated by counterparty credit and funding risk point in the direction of global valuation. Finally, proposals for restructuring counterparty credit risk, ranging from contingent credit default swaps to margin lending, are considered.
Counterparty Credit Risk Modelling
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Author : Michael Pykhtin
language : en
Publisher: Riskbooks
Release Date : 2005-01
Counterparty Credit Risk Modelling written by Michael Pykhtin and has been published by Riskbooks this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005-01 with Capital market categories.
To enhance your understanding of the risk management, pricing and regulation of counterparty credit risk, this new title offers the most detailed and comprehensive coverage available. Michael Pykhtin, a globally respected expert in credit risk, has combed the industry's most important organisations to assemble a winning team of specialist contributors - presenting you with the definitive insider view.
Counterparty Credit Risk
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Author : Eduardo Canabarro
language : en
Publisher:
Release Date : 2009
Counterparty Credit Risk written by Eduardo Canabarro and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Derivative securities categories.
This book is a collection of cutting-edge reflections and ideas on methods and practices used to measure, price and manage OTC derivative counterparty risk.
Counterparty Credit Risk
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Author : Jon Gregory
language : en
Publisher: John Wiley & Sons
Release Date : 2011-09-07
Counterparty Credit Risk written by Jon Gregory and has been published by John Wiley & Sons this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-09-07 with Business & Economics categories.
The first decade of the 21st Century has been disastrous for financial institutions, derivatives and risk management. Counterparty credit risk has become the key element of financial risk management, highlighted by the bankruptcy of the investment bank Lehman Brothers and failure of other high profile institutions such as Bear Sterns, AIG, Fannie Mae and Freddie Mac. The sudden realisation of extensive counterparty risks has severely compromised the health of global financial markets. Counterparty risk is now a key problem for all financial institutions. This book explains the emergence of counterparty risk during the recent credit crisis. The quantification of firm-wide credit exposure for trading desks and businesses is discussed alongside risk mitigation methods such as netting and collateral management (margining). Banks and other financial institutions have been recently developing their capabilities for pricing counterparty risk and these elements are considered in detail via a characterisation of credit value adjustment (CVA). The implications of an institution valuing their own default via debt value adjustment (DVA) are also considered at length. Hedging aspects, together with the associated instruments such as credit defaults swaps (CDSs) and contingent CDS (CCDS) are described in full. A key feature of the credit crisis has been the realisation of wrong-way risks illustrated by the failure of monoline insurance companies. Wrong-way counterparty risks are addressed in detail in relation to interest rate, foreign exchange, commodity and, in particular, credit derivative products. Portfolio counterparty risk is covered, together with the regulatory aspects as defined by the Basel II capital requirements. The management of counterparty risk within an institution is also discussed in detail. Finally, the design and benefits of central clearing, a recent development to attempt to control the rapid growth of counterparty risk, is considered. This book is unique in being practically focused but also covering the more technical aspects. It is an invaluable complete reference guide for any market practitioner with any responsibility or interest within the area of counterparty credit risk.
Credit Risk Modeling Valuation And Hedging
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Author : Tomasz R. Bielecki
language : en
Publisher: Springer Science & Business Media
Release Date : 2013-03-14
Credit Risk Modeling Valuation And Hedging written by Tomasz R. Bielecki and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-03-14 with Business & Economics categories.
Mathematical finance and financial engineering have been rapidly expanding fields of science over the past three decades. The main reason behind this phenomenon has been the success of sophisticated quantitative methodolo gies in helping professionals manage financial risks. It is expected that the newly developed credit derivatives industry will also benefit from the use of advanced mathematics. This industry has grown around the need to handle credit risk, which is one of the fundamental factors of financial risk. In recent years, we have witnessed a tremendous acceleration in research efforts aimed at better comprehending, modeling and hedging this kind of risk. Although in the first chapter we provide a brief overview of issues related to credit risk, our goal was to introduce the basic concepts and related no tation, rather than to describe the financial and economical aspects of this important sector of financial market. The interested reader may consult, for instance, Francis et al. (1999) or Nelken (1999) for a much more exhaustive description of the credit derivatives industry.
Counterparty Risk And Funding
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Author : Stéphane Crépey
language : en
Publisher: CRC Press
Release Date : 2014-06-23
Counterparty Risk And Funding written by Stéphane Crépey and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-06-23 with Business & Economics categories.
Solve the DVA/FVA Overlap Issue and Effectively Manage Portfolio Credit Risk Counterparty Risk and Funding: A Tale of Two Puzzles explains how to study risk embedded in financial transactions between the bank and its counterparty. The authors provide an analytical basis for the quantitative methodology of dynamic valuation, mitigation, and hedging of bilateral counterparty risk on over-the-counter (OTC) derivative contracts under funding constraints. They explore credit, debt, funding, liquidity, and rating valuation adjustment (CVA, DVA, FVA, LVA, and RVA) as well as replacement cost (RC), wrong-way risk, multiple funding curves, and collateral. The first part of the book assesses today’s financial landscape, including the current multi-curve reality of financial markets. In mathematical but model-free terms, the second part describes all the basic elements of the pricing and hedging framework. Taking a more practical slant, the third part introduces a reduced-form modeling approach in which the risk of default of the two parties only shows up through their default intensities. The fourth part addresses counterparty risk on credit derivatives through dynamic copula models. In the fifth part, the authors present a credit migrations model that allows you to account for rating-dependent credit support annex (CSA) clauses. They also touch on nonlinear FVA computations in credit portfolio models. The final part covers classical tools from stochastic analysis and gives a brief introduction to the theory of Markov copulas. The credit crisis and ongoing European sovereign debt crisis have shown the importance of the proper assessment and management of counterparty risk. This book focuses on the interaction and possible overlap between DVA and FVA terms. It also explores the particularly challenging issue of counterparty risk in portfolio credit modeling. Primarily for researchers and graduate students in financial mathematics, the book is also suitable for financial quants, managers in banks, CVA desks, and members of supervisory bodies.
Credit Risk
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Author : Niklas Wagner
language : en
Publisher: CRC Press
Release Date : 2008-05-28
Credit Risk written by Niklas Wagner and has been published by CRC Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-05-28 with Business & Economics categories.
Featuring contributions from leading international academics and practitioners, Credit Risk: Models, Derivatives, and Management illustrates how a risk management system can be implemented through an understanding of portfolio credit risks, a set of suitable models, and the derivation of reliable empirical results. Divided into six sectio