Killing two birds with one stone

Counterparty risk

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Users of credit derivatives contracts have always been aware that credit default swaps (CDSs) expose users not only to the name the protection is written on but also to the firm that writes the protection. And it didn’t take long after the advent of the CDS market to see just how closely correlated these two risks can be.

The 1997 Asian financial crisis rammed home the issue of two-name exposure – where sellers of default protection on, say, Korean corporations tended to be Korean banks. So it

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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