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
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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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