Technical papers/Credit Risk
Pricing corporate loans under the risk-neutral measure
Corporate loans trade infrequently, and most methods for discounting loan cashflows ignore the effects of default and prepayment and are unable to value revolving loans. To improve loan valuation and risk...
We present a new structural credit model that is able to incorporate available soft information, diverse qualitative data and subjective opinions on managerial ability to handle credit events within approximations...
Ratings-based (RB) additional termination event (ATE) clauses in International Swaps and Derivatives Association agreements can have a significant impact on the valuation of derivatives portfolios when...
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More Technical papers/Credit Risk articles
Conversion of upfront CVA into running CVA
The credit value adjustment that crystallises counterparty risk in a derivatives price is generally thought of as an upfront payment, but could equally well be converted into a running premium in appropriate products. But the obvious ways to do this lead...
Generalized beta regression models for random loss-given-default.
A framework for modeling systematic risk in loss given default in the context of credit portfolio losses is described in this paper. The class of models is very flexible and accommodates skewness and heteroskedastic errors well. The inference of models...
Market pricing of credit-linked notes: The case of retail structured...
The volume of the primary market of certificates for retail investors has increased enormously in the past ten years, and German banks have recently started issuing credit-linked notes (CLNs). As with other types of certificates, the question can be raised...
Cutting Edge introduction: clarity needed on credit adjustments
A debate over whether to include counterparty risk adjustments at the point of default is animating quants, but either of the obvious answers could exacerbate systemic risk. Laurie Carver introduces this month’s technical papers
Cutting Edge: the year of CVA
With derivatives counterparty risk rocketing up the agenda this year, researchers have tried to shed some light on the associated challenges - from capital calculation to pricing - as the annual round-up of Risk's technical papers and citations shows....
Close-out convention tensions
There is an ambiguity in the market about the convention for valuing a derivative’s close-out value to be settled at default – in particular whether or not to include adjustments for the credit risk of the surviving party. Damiano Brigo and Massimo...
Cutting Edge introduction: the DVA debate
Banks profiting from a widening of their own credit spreads is causing more scrutiny of the debit value adjustment, with some viewing it as an accounting trick and others arguing it is a fact of life, however counter-intuitive it might seem. Laurie Carver...
How can investment banks use grid technology?
Learn how technology is enhancing risk management
Technology can provide a competitive advantage in banking. How it is applied by Tier 1 and Tier 2 institutions, to the benefit for their risk management systems, is discussed.
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What’s next for fixed-income ETFs and structured products?
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The OTC Derivatives Markets Conference
UK, 26th Sep 2013
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Risk USA
USA, 21st - 24th Oct 2013
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