Valuation In A World Of Cva And Dva
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Valuation In A World Of Cva Dva And Fva A Tutorial On Debt Securities And Interest Rate Derivatives
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Author : Smith Donald J
language : en
Publisher: #N/A
Release Date : 2017-07-20
Valuation In A World Of Cva Dva And Fva A Tutorial On Debt Securities And Interest Rate Derivatives written by Smith Donald J and has been published by #N/A this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-20 with Business & Economics categories.
CVA, DVA, and FVA, which are the acronyms for credit, debit, and funding valuation adjustments, have become widely used by major banks since the financial crisis. This book aims to bridge the gap between the highly complex and mathematical models used by these banks to adjust the value of debt securities and interest rate derivatives, and the end users of the valuations, for example, accountants, auditors, and analysts. The book, which is essentially a tutorial, demonstrates the types of models that are used using binomial trees that are featured in the CFA® fixed income curriculum and allows readers to replicate the examples using a spreadsheet.
Valuation In A World Of Cva And Dva
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Author : Donald Smith
language : en
Publisher: CreateSpace
Release Date : 2015-08-12
Valuation In A World Of Cva And Dva written by Donald Smith and has been published by CreateSpace this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-08-12 with categories.
Credit risk models invariably are mathematical, and can be dauntingly so. Nevertheless, an understanding of the impact of credit risk on the valuation of debt securities and derivatives is essential to investment analysis and risk management. The financial crisis that started in 2007 exposed the importance of counterparty credit risk; nowadays, CVA and DVA-credit valuation and debit (or debt) valuation adjustments, respectively-are part of the vocabulary of risk analysis in the "post-Lehman" world. This tutorial introduces the key parameters that drive CVA and DVA (the expected exposure to default loss, the probability of default, and the recovery rate) and demonstrates the impact of changes in credit risk on values of various types of debt securities and interest rate derivatives in a simplified format using diagrams and tables, albeit with some mathematics.
The Xva Of Financial Derivatives Cva Dva And Fva Explained
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Author : Dongsheng Lu
language : en
Publisher: Springer
Release Date : 2015-11-10
The Xva Of Financial Derivatives Cva Dva And Fva Explained written by Dongsheng Lu and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-11-10 with Business & Economics categories.
This latest addition to the Financial Engineering Explained series focuses on the new standards for derivatives valuation, namely, pricing and risk management taking into account counterparty risk, and the XVA's Credit, Funding and Debt value adjustments.
Xva
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Author : Andrew Green
language : en
Publisher: John Wiley & Sons
Release Date : 2015-10-08
Xva written by Andrew Green 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 2015-10-08 with Business & Economics categories.
Thorough, accessible coverage of the key issues in XVA XVA – Credit, Funding and Capital Valuation Adjustments provides specialists and non-specialists alike with an up-to-date and comprehensive treatment of Credit, Debit, Funding, Capital and Margin Valuation Adjustment (CVA, DVA, FVA, KVA and MVA), including modelling frameworks as well as broader IT engineering challenges. Written by an industry expert, this book navigates you through the complexities of XVA, discussing in detail the very latest developments in valuation adjustments including the impact of regulatory capital and margin requirements arising from CCPs and bilateral initial margin. The book presents a unified approach to modelling valuation adjustments including credit risk, funding and regulatory effects. The practical implementation of XVA models using Monte Carlo techniques is also central to the book. You'll also find thorough coverage of how XVA sensitivities can be accurately measured, the technological challenges presented by XVA, the use of grid computing on CPU and GPU platforms, the management of data, and how the regulatory framework introduced under Basel III presents massive implications for the finance industry. Explores how XVA models have developed in the aftermath of the credit crisis The only text to focus on the XVA adjustments rather than the broader topic of counterparty risk. Covers regulatory change since the credit crisis including Basel III and the impact regulation has had on the pricing of derivatives. Covers the very latest valuation adjustments, KVA and MVA. The author is a regular speaker and trainer at industry events, including WBS training, Marcus Evans, ICBI, Infoline and RISK If you're a quantitative analyst, trader, banking manager, risk manager, finance and audit professional, academic or student looking to expand your knowledge of XVA, this book has you covered.
The Xva Challenge
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Author : Jon Gregory
language : en
Publisher: John Wiley & Sons
Release Date : 2015-10-26
The Xva Challenge 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 2015-10-26 with Business & Economics categories.
A detailed, expert-driven guide to today's major financial point of interest The xVA Challenge: Counterparty Credit Risk, Funding, Collateral, and Capital is a practical guide from one of the leading and most influential credit practitioners, Jon Gregory. Focusing on practical methods, this informative guide includes discussion around the latest regulatory requirements, market practice, and academic thinking. Beginning with a look at the emergence of counterparty risk during the recent global financial crisis, the discussion delves into the quantification of firm-wide credit exposure and risk mitigation methods, such as netting and collateral. It also discusses thoroughly the xVA terms, notably CVA, DVA, FVA, ColVA, and KVA and their interactions and overlaps. The discussion of other aspects such as wrong-way risks, hedging, stress testing, and xVA management within a financial institution are covered. The extensive coverage and detailed treatment of what has become an urgent topic makes this book an invaluable reference for any practitioner, policy maker, or student. Counterparty credit risk and related aspects such as funding, collateral, and capital have become key issues in recent years, now generally characterized by the term 'xVA'. This book provides practical, in-depth guidance toward all aspects of xVA management. Market practice around counterparty credit risk and credit and debit value adjustment (CVA and DVA) The latest regulatory developments including Basel III capital requirements, central clearing, and mandatory collateral requirements The impact of accounting requirements such as IFRS 13 Recent thinking on the applications of funding, collateral, and capital adjustments (FVA, ColVA and KVA) The sudden realization of extensive counterparty risks has severely compromised the health of global financial markets. It's now a major point of action for all financial institutions, which have realized the growing importance of consistent treatment of collateral, funding, and capital alongside counterparty risk. The xVA Challenge: Counterparty Credit Risk, Funding, Collateral, and Capital provides expert perspective and real-world guidance for today's institutions.
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.
Xva Desks A New Era For Risk Management
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Author : I. Ruiz
language : en
Publisher: Springer
Release Date : 2015-04-27
Xva Desks A New Era For Risk Management written by I. Ruiz and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-04-27 with Business & Economics categories.
Written by a practitioner with years working in CVA, FVA and DVA this is a thorough, practical guide to a topic at the very core of the derivatives industry. It takes readers through all aspects of counterparty credit risk management and the business cycle of CVA, DVA and FVA, focusing on risk management, pricing considerations and implementation.
Credit Risk Management For Derivatives
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Author : Ivan Zelenko
language : en
Publisher: Springer
Release Date : 2017-07-20
Credit Risk Management For Derivatives written by Ivan Zelenko and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-07-20 with Business & Economics categories.
This Palgrave Pivot assesses the impact of the regulatory framework for derivatives built post-crisis and examines its ambition to centralize and minimize credit risk, enhance transparency, and regain control. Zelenko delves into the powerful destabilizing forces exerted by derivatives markets in the global financial meltdown of 2008. Recapping the evolution in markets and counterparty risk management, as well as key aspects of regulation and their impact, this book aims to give readers the big picture and foster a deep understanding of the role of derivatives markets in the financial crisis. This practical angle will give useful keys to end-users and their risk managers, as they are faced with a new, complex, and changing environment. Additionally, this book conducts a comprehensive analysis of the new metrics the market has created to model, price, and manage credit risk, such as the Credit Value Adjustment (CVA), the Debt Value Adjustment (DVA), or the Funding Value Adjustment (FVA), and takes full stock of a domain that is still in rapid evolution. This volume covers the concepts, methods, and approaches taken by banks to manage counterparty credit risk in their derivatives activities in the new post-crisis market and regulatory environment, and it aims to highlight what is practical and effective today.
A Simple Look At Xvas Cva Dva Fca Kva
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Author : Lincoln Hannah
language : en
Publisher:
Release Date : 2014
A Simple Look At Xvas Cva Dva Fca Kva written by Lincoln Hannah and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Using a simple one-period model of XVAs (CVA, DVA, FCA, KVA) I derive some interesting results: 1) A change in the bank's borrowing cost does not impact P&L because the change in trade value (through DVA, FCA) is offset by a change in the value of the bank's debt.2) CVA represents the cost of hedging counterparty credit risk, though has the same value regardless of whether counterparty credit risk is actually hedged. However, the decision of whether to hedge CVA affects FCA and KVA:-FCA (Funding Cost Adjustment) - Since hedging CVA means funding a CDS premium.-KVA (Capital Value Adjustment) - Since hedging CVA reduces the trade's capital requirement. The effects in 2), FCA and KVA are offsetting, so we can't say in the real world whether it will be economical for a bank to hedge CVA or not. The affect in 1) doesn't translate exactly to the real world due to factors such as the different tenors of a bank's funding requirements and actual borrowing and different accounting treatments for borrowing and trading.
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.