The existence of multiple rule books may deter issuers and investors in securitisation
Credit factor models tend to obscure the economics in favour of tractability – and this puts them at odds with rigorous arbitrage-free martingale pricing methods. To resolve this, quants are looking more closely at what a systematic risk factor actually...
Systematic risk factors redefined
Wrong-way risk (WWR) behaves differently for exposures to systemically important counterparties because their default has the potential to move financial markets before the close-out. Michael Pykhtin and Alexander Sokol show how the traditional exposure...
Exposure under systemic impact
Court will rule on compromise agreement between bankrupt city and swaps counterparties
The risk of exposure and counterparty default probability both increasing – so-called wrong-way risk – is usually understood in terms of the correlation between the two variables. But this approach is focused more on the centre of the distribution,...
The Basel approach is criticised as inconsistent, prompting a group of quants to develop an alternative
Committee may introduce new floors on internal model outputs, after a report on RWAs for credit risk in the banking book found wide variations in bank practices
New rules aim to promote the market but banks still prefer the WMP route
The UK regulator calms reclassification fears by exempting SPVs that issue debt securities from being classed as alternative investment funds
Rules would require banks to allocate all securitisation exposure by individual, underlying obligor
Before the European Central Bank takes on its new supervisory role, a planned asset-quality review should ensure it is not walking into trouble. That’s if the process is thorough, of course, and untainted by political pressure – sceptics say that...