Technical paper/Wrong-way risk (WWR)
Wrong-way risk, credit and funding
The risk of exposure and counterparty default probability both increasing – so-called wrong-way risk – is usually understood in terms of the correlation between the two variables. But this approach is focused more on the centre of the distribution, and…
Cutting Edge introduction: Wrong-way risk and the limits of correlation
Traditional models for wrong-way risk focus on the correlation between default and exposure – a blunt tool for a tail risk. Alternatives are thin on the ground, but a scenario-based approach may provide some fresh insight. Laurie Carver introduces this…
