Central counterparty CVA

Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership

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Matthias Arnsdorf explores how to quantify the loss a financial institution can expect due to central counterparty (CCP) membership. This expected loss can be interpreted as a CCP counterparty valuation adjustment. The results are applied to the calculation of losses in stress scenarios as specified, for example, by the Comprehensive Capital Analysis and Review regulatory framework. The author shows that a typical stressed expected loss ranges between 10bp and 40bp of