Credit Suisse losses show why boards require real risk management expertise, says ex-BoE supervisor
In this paper, we investigate the alpha factor’s sensitivity to key model parameters under stylized portfolio assumptions in order to better understand its complex characteristics. Our analysis is based on the numerical simulation of alpha sensitivities…
Creditworthiness of individual entities may offer an insight into systemic risk of financial markets
Derivatives pricing is approximated with a computationally efficient homotopy-based application that accounts for WWR
In this paper, we present an analytical expression for CVA with WWR under the assumption of the lognormally distributed trade value.
Quants discuss a better way to model wrong-way risk
Tsz-Kin Chung and Jon Gregory calibrate wrong-way risk with the help of quanto CDS values
This paper proposes an efficient method to obtain the distribution of the CVA at a given risk horizon, from which risk measures such as the CVA VaR can be computed.
This paper investigates wrong-way risk effects on the pricing of counterparty credit risk for interest rate instruments.
Researchers advise including correlations both with rate level and volatility in CVA calculations
A calculation of CVA integrating a commodity futures exposure with probability of an event under WWR and credit downgrades
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).
Move will facilitate index arbitrage trades and put CDSClear one step ahead of rival Ice, note FCMs
Global banks charge premium for accepting local securities instead of major currencies
The authors consider risk-neutral valuation of a contingent claim under bilateral counterparty risk using the well-known reduced-form approach.
This paper develops a connection between the Hull–White parametric approach and the PCL correlation approach for CVA calculation.
Risk Awards 2017: Bespoke stress tests helped navigate Brexit and autocallable pressure
The author of this paper presents a general and path-consistent wrong-way risk (WWR) model that does not require simulation of credit and market variables simultaneously.
Quants propose easy approximations for modelling wrong-way risk in CVA frameworks
Fabio Mercurio and Minqiang Li investigate CVAs in the presence of wrong-way risk
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
Quant Congress USA: CCPs struggle to model conditional losses and auction behaviour
Counterparty correlations are no substitute for due diligence, argues Kaminski
How much margin is missing in sovereign swaps? The stress test had the answer