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. By Laurie Carver

Who says quants occupy an ivory tower? This year’s technical articles reflect a preoccupation with a real-world concern – credit value adjustment (CVA), or the counterparty credit component of derivatives market value. Six of the 26 articles published by Risk in the past 12 months focused on the topic, which has shot to prominence as a result of the credit stress many banks are suffering, and the punitive capital charge that will be levied against CVA when portions of Basel III are implemented

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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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