Credit valuation adjustment (cva)
Counterparty risk is difficult to include systematically in credit default swap pricing. Reviving Merton’s structural approach – and generalising to higher dimensions – makes it tractable. By Alex...
Hedges will attract capital instead of providing capital relief, argues Citi exec
In this paper (in English and German), Genscape has analysed Combined Heat and Power or Central Heat and Power (CHP)production in the German market, the challenges it raises for market participants, and the key steps required to address the fundamental lack of transparency in CHP plant production.
More Credit valuation adjustment (cva) articles
The European Banking Authority has proposed a way for banks to calculate a credit valuation adjustment capital charge when credit default swap spreads are absent or illiquid – but it does not solve the problem, argue Eduardo Epperlein, Kyriakos Chourdakis,...
Harnessing credit and debit valuation adjustments to credit default swaps may have seemed a good idea a few years ago, but as that market shrinks, it is eroding their foundations. Laurie Carver reports
Sometime in mid-2006, the outstanding notional of the single-name credit default swap (CDS) market passed the $15 trillion mark, according to the Bank for International Settlements (BIS). It was on a steep upward trajectory that reached a $33.4 trillion...
Traditional models for wrong-way risk focus on the correlation between default and exposure – a blunt tool for a tail risk. Alternatives are thin on the ground, but a scenario-based approach may provide some fresh insight. Laurie Carver introduces this...
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,...
Deal is said to pay a coupon of 11% for first-loss protection – which some investors say is too low
In response to industry fears of a collateral crunch, regulators have revised the proposed rules on margining for uncleared over-the-counter (OTC) derivatives.You can find out more by downloading this white paper here.
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