Counterparty risk capital and CVA

Counterparty risk capital and CVA

Counterparty credit risk (CCR) is one of the primary focus points of the recent changes to regulatory minimum capital requirements, now commonly known as Basel III (Basel Committee on Banking Supervision (BCBS), 2010). Among other things, Basel III has introduced the concept of credit valuation adjustment (CVA) into calculations of the CCR capital charge. CVA appears twice in the Basel III minimum capital requirements for CCR.

In addition to the default capital charge, banks are required to

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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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