Technical paper/Credit risk
Sec-lending haircuts and indemnification pricing
A pricing method for borrowed securities that includes haircut and indemnification is introduced
CVA with Greeks and AAD
Reghai, Kettani and Messaoud present new technique to calculate CVA using adjoints
Jumping with default: wrong-way risk modelling for CVA
Fabio Mercurio and Minqiang Li investigate CVAs in the presence of wrong-way risk
FVA for general instruments
Alexander Antonov, Bianchetti and Mihai develop a universal and efficient approach to numerical FVA calculation
Wrong-way risk done right
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
Warehousing credit risk: pricing, capital and tax
Kenyon and Green model the effects to pricing of credit warehousing, capital and tax
Path-consistent wrong-way risk
A copula-based model for wrong way risk
Credit exposure models backtesting for Basel III
The Basel Committee on Banking Supervision has introduced strict regulatory guidance on how to validate and backtest internal model methods for credit exposure. Fabrizio Anfuso, Dimitrios Karyampas and Andreas Nawroth incorporate these guidelines into a…
Adjoint credit risk management
Adjoint algorithmic differentiation is one of the principal innovations in risk management in recent times. Luca Capriotti and Jacky Lee show how this technique can be used to compute real-time risk for credit products, even those valued with fast semi…
Cutting edge intro: CDOs and the risk of risk aversion
New analysis shows CDOs can withstand high levels of correlation – what they can’t cope with, though, is a sudden change in risk appetite
Options for collateral options
When collateral can be posted in multiple currencies, pricing even the simplest derivatives involves optionality, which is often tackled numerically. But by conditioning on a risk factor to make variables independent, this can be simplified. Alexandre…
The simple link from default to LGD
A new approach to incorporating loss given default into models
Stochastic modelling of reinsurance credit risk
Stochastic modelling of reinsurance credit risk
The simple link from default to LGD
The simple link from default to LGD
Systematic risk factors redefined
Credit risk factor models tend to have a narrow focus on the Gaussian case, use copula functions that don’t work well with the martingale methods used in pricing, and can introduce arbitrage. Dariusz Gatarek and Juliusz Jablecki show how an increasing…